The budget and structure of the Ministry of Justice - Justice Committee Contents


3  Improving cost-effectiveness

120.  Transforming Justice activities, prior to the 2010 Spending Review, were expected to accrue savings amounting to hundreds of millions of pounds. By June 2010, the MoJ had identified additional, highly provisional, savings from the programme, with a top range of £1 billion. Ideas emerging at this stage had provided the framework for Spending Review discussions, but the MoJ's final Spending Review settlement later that year required a 23% cut in annual budgets over the ensuing four years - far higher at £1.6 billion[149] than the savings identified from the Transforming Justice Programme.[150]

121.  In the face of financial austerity, the Institute for Government concluded in May 2011 that the challenge for the MoJ was to maintain the focus on the original ambition of Transforming Justice—to make its services better—and to ensure that the initiative did not become conflated into a programme of cuts. Transforming Justice was the 'brand' that packaged the overall reforms, but 'better for less' was the phrase that resonated amongst staff in the MoJ as they could apply that concept to their day jobs.[151]

122.  The MoJ told us that it was seeking to make savings where they were most achievable without harming front line services, rather than 'salami-slicing' budgets.[152] Sir Suma Chakrabarti explained:

Our very tight financial settlement has made it a challenging year, we have worked to make efficiencies and target our resources where they are most needed. We've streamlined the business and worked hard to cut out unnecessary overheads and non-essential projects, whilst working to continually improve the service we provide to the public.[153]

123.  Following the 2011 summer riots, and in response to policy decisions, such as the decision not to proceed with plans to reform early guilty pleas, the MoJ has had to revise its savings plans. The Department emphasised that it continued to monitor the delivery of its plans to ensure that they were on track.[154]

124.  The National Audit Office's briefing to us explained that most governments throughout Europe were trying to drive down costs in their justice departments, and there was significant overlap in the measures these departments and the MoJ were taking.[155] When we were in Denmark as part of our youth justice inquiry, we raised this with their officials who said that their Ministry of Justice had struggled to find efficiency savings and were unable to fund new initiatives because budgets had been tightened.

125.  Last November the MoJ topped an efficiency ranking survey conducted by Civil Service World, based on data contained on departmental business plans in 2009-10. The survey ranked 17 departments in four key fields of annual spending: HR cost per full-time equivalent (FTE) employee; desktop PC cost per FTE; estates cost per FTE; and the value of goods and services bought for every pound spent on procurement.[156]

Financial planning model and the new Operating model

IMPROVED FINANCIAL PLANNING

126.  The NAO reported that the MoJ had used its improved modelling capability in its financial planning. It now had workflow models covering criminal, family and civil justice, and used data from these in its financial planning model to estimate the potential impact of changes in demand throughout the justice system; for example, increased flow through the courts and prisons due to the impact of the summer 2011 riots. These workflow models provided a coherent and consistent platform for operational and financial modelling.[157]

127.  The new multi-year financial planning model (which replaced annual budgeting) provided a single, consistent picture of financial resource requirements and savings plans.[158] This was supported by full and clear "assumption books" that outlined the inputs, assumptions and methods behind financial and savings plans (such as for key policy reforms), and were shared with stakeholders, including agencies, to ensure they were consistent.[159] This enabled the Department's decision-makers to see how far current saving plans would bridge the gap between 'business as usual' projected spending and target spending under the spending review settlement.[160]

128.  Another improvement was the ability of the MoJ's financial management committee to be able to use data collated from different accounting systems to identify likely areas of underspend and redeploy these funds to meet long-term liabilities and to meet other spending priorities, which in turn reduced funding pressure.[161]

129.  As well as having good financial control over what it has spent, the Ministry also needs to have detailed knowledge and budgetary control of its future spending plans. This is particularly the case as the Ministry is susceptible to shocks in demand as seen following the riots in the summer of 2011. The steps the Ministry has taken in this area should help to mitigate this risk.

OPERATING MODEL

130.  In 2010 the MoJ created a new Operating Model Blueprint (OMB). The aims were to ensure that:

  • all policy was undertaken in a single Business Group and focused on ministerial priorities or changes required by delivery bodies;
  • wherever appropriate, corporate services were provided on a shared or combined basis, including to ALBs;
  • there was a small strategic core that supported ministers, provided a strategic framework and ensured governance; and
  • delivery bodies could focus on their core mission of leading the delivery of services.

The MoJ told us that it was part of the way through implementing the blueprint. The Department was now structured around four Business Groups: Justice Policy Group; Corporate Performance Group; HMCTS; and NOMS, with the majority of Arm's Length Bodies contained within the Justice Policy Group.[162]

131.  Changes to the MoJ's operating model also led to NOMS moving from a regional to a functional structure. NOMS was now structured around its core functions of commissioning; contract management; and system integration whilst it established a resilient structure for the management of public sector prisons.[163]

132.  Michael Spurr, Chief Executive, NOMS, explained how the new operating model helped to remove duplication:

One of the key factors is moving towards a new functional model and also a new operating model that says, "We will take services from the core Department where it makes sense to do that so that we do not duplicate." That is absolutely a core part of how we are operating. Estates is now managed [...] across the Ministry, as is procurement. [...] Audit is now being done across the Ministry. [...] What we have to avoid is rehearsing or redoing work that has already been done or duplicating work. We are working closely with our MoJ colleagues to avoid that happening. We will continue to have to look very closely at where there is potential for duplication as we implement the new operating model over the next year or so. We will do that because I cannot afford, quite frankly, for there to be duplication between us and the MoJ or indeed across various directorates within my own organisation.[164]

133.  We welcome the introduction of the new operating model which has enabled corporate and back office functions to be shared by all parts of the Ministry to avoid duplication. However, we believe that further integration is required so that the MoJ is a single delivery body.

Reducing staff costs

134.  The MoJ estimated that it would lose around 13,000 posts over the four year spending review period.[165] Between April 2010 and December 2011, full-time equivalent staff (FTE) numbers fell by 6,195 to 67,819.[166] Sir Suma told us "we have focused reductions, including those outside London, on back office and management functions - including the removal of the regional structure in NOMS, an entire management tier in HMCTS, and a consolidation of corporate services in 'My Services'".[167] To protect front line operations, 30% of the annual £1 billion efficiency savings would come from back office operations but only 10% from front line operations.[168]

135.  Headcount reductions started at the top, with a reduction from 13 to six in the number of Directors General. There was also a 22% reduction in Senior Civil Service staff across HMCTS, NOMS and HQ.[169] In 2011, the Institute for Government expressed some concerns that, whilst the headcount reduction was generally thought to have been well handled so far, there was a risk of the wrong staff being lost.[170]

136.  Despite its vigorous staff reduction plan, the Lord Chief Justice told us that there was no evidence to show any adverse effect on the performance of HMCTS. He was conscious that staff numbers were reducing more dramatically than the reduction in workload. He added that he found comfort from the reassurances received that any money available from savings elsewhere would be used to maintain the numbers of front-line staff.[171]

137.  In contrast, the joint written submission from HM Chief Inspector of Prisons, HM Chief Inspector of Probation and The Prisons and Probation Ombudsman described difficulties in securing the right skills in their teams. It was critical of the lengthy process it was subject to in order to agree a business case for appointments, and that approval for previous agreed posts had subsequently been withdrawn, presumably due to Departmental headcount obligations. It concluded that these issues restricted their ability to manage agreed resources effectively, and to recruit an appropriately diverse staff with the skills and attitudes they required in a timely fashion.[172]

138.  The MoJ has taken the correct approach by focusing the highest proportion of job losses in senior management grades in order to safeguard frontline jobs. We call on the Ministry to go further in removing unnecessary layers from their management structures in order to free up resources for the front line.

139.  The difficulties in recruitment raised by the Chief Inspectors of Prisons and Probation and the Prisons and Probation Ombudsman are a matter for concern. In the response to this Report the Ministry must explain why previously agreed posts had subsequently been withdrawn. The Chief Inspectors and Ombudsman have a role as watchdogs and, although they will also be subject to efficiency savings, they must be able to recruit the staff they require in a reasonable fashion.

140.  As we mention in paragraph 44, over time there has been a shift in culture within the MoJ as staff with a policy background are increasingly required to adopt more of a programme management-style approach in order to take forward the MoJ's reforms. Sir Suma told the Public Administration Committee that the MoJ was committed to acquiring and retaining the expertise necessary to carry out its reforms, and in particular it was reviewing how the MoJ commissioned services. This review would explore whether the right skills were in the right place in order to achieve efficient and effective commissioning and contracting of services over the next 5-10 years.[173]

141.  The Prison Reform Trust expressed concern that few officials had the highly developed skills or knowledge base required for effective commissioning and contracting,[174] and the Public and Commercial Services Union considered that staff reductions had led to there being too few staff with this skill set. For those that did have the skills, they were only able to allocate part of their job towards contract management.[175] In addition, the MoJ's 2012 Capability Action Plan also stated that "[c]ommercial skills and awareness should be strengthened throughout the organisation".[176]

142.  Concerns have been raised with us that the Ministry does not have the skills in place to meet the increased demands of commissioning and contract management. This places the Department, and the public purse, in a dangerous position when it enters into negotiations with private sector firms. We call on the Department to demonstrate in its response that it has the necessary skills to deliver its plans in this area, and to set out the steps it has already taken and will be taking to ensure its workforce has the necessary capabilities.

143.  In January 2012, The Times raised concerns that the private sector repeatedly poached governors from public sector prisons. It claimed Governors were attracted by the greater freedom available in the private sector to innovate in an attempt to cut reoffending.[177] Phil Wheatley, former Chief Executive of NOMS, confirmed that good governors were a scarce resource. His impression whilst in post was that the best governors were staying in the public sector, but he suspected that as public sector pay restraint continued it would not be easy to retain staff when the private sector did not have these constraints. He had been successful in recruiting people with management experience in other spheres to work as governors.[178] Whilst some good people had left the public sector, it was equally true that some people have come from the private sector to work in the public sector. Michael Spurr, Chief Executive, NOMS, argued "the thing the public sector offers that [...] the private sector does not offer is a potential for career development that is wider than just prisons".[179]

144.  The prospect of talented individuals leaving the Department is likely to have a big impact. In the MoJ's Capability Action Plan 2012 it was admitted that successful outcomes were sometimes harder won than was necessary as the Department was overly reliant on relatively small numbers of staff. It continued, "[t]his needs addressing through improved talent management, development and succession planning to ensure a greater depth of people capability".[180]

145.  As competition for the Ministry's services increases there will be greater opportunities for staff to move from the public to the private sector and vice versa. This experience should be beneficial for individuals and the Department as a whole. Whilst it is not clear that the Department has a problem in attracting staff, we recommend that it creates a strategy for attracting and retaining talented individuals.

146.  From 2009-10 onwards, the number of consultants, agency or temporary staff used by the MoJ was an average of 2,476 FTE in 2009-10, falling to 1,181 in July 2011. Every business area of the MoJ was required to look critically at the need for consultancy staff in order to keep such services to an absolute minimum. The Department introduced processes whereby a detailed business case was required before consultants or agency staff could be taken on. This business case was challenged by the relevant directors, and if the contract value was £20,000 or above ministerial approval was required. This improved stewardship resulted in a significant reduction in costs. In 2010-11 the MoJ spent £104 million on consultancy (1.16% of the budget); In 2011-12 this was anticipated to reduce to £75 million (0.84% of the budget). The projected costs for 2011-12 represents a reduction in spend of over 50% since 2009-10 when expenditure was £152 million.[181]

147.  The Department has made some progress in reducing its previously high levels of spending on agency staff. Given that the Department has assessed its structures and introduced new operating models, it should have a clear idea where the capability gaps amongst staff are. We recommend that the Department redeploys and retrains its existing permanent staff where possible to fill current gaps. If there are full-time vacancies then the Department itself should seek to recruit. Consultants and agency staff should only be required on specialised projects and during seasonal or unexpected peaks in work. We expect the expenditure in this area to continue to decrease significantly.

Smaller estate

148.  Prior to the 2010 Spending Review, the MoJ estate consisted of 2,140 property holdings with a balance sheet value of £8.6 billion—second only to the MoD across Government. It is currently developing its Estates Strategy, taking account of its three strategic priorities:

  • an estate of appropriate capacity to meet business needs;
  • an efficient, less costly estate; and
  • a more sustainable estate.[182]

149.  The MoJ has already made progress in rationalising its estate through new builds and building closures where appropriate:

  • Administrative estate: 40 properties of the planned reduction of 94 properties have already closed. Within London, 18 properties will reduce to a maximum of four. Once complete this should save around £47 million a year.
  • HMCTS estate: 112 of the 142 courts identified for closure in the Court Estate Reform Programme had closed by November 2011. Once complete the programme should reduce costs by around £14 million a year. New court buildings (Westminster, Royal Courts of Justice Rolls Building and the extension to the Woolwich Crown Court) had also opened.
  • Prison estate: As part of its commitment to deliver sufficient prison and court capacity for civil and criminal justice, the MoJ was building additional capacity where necessary and closing surplus capacity where possible. Five prisons closed in 2011 which should realise savings of around £30 million a year. The multi-billion pound prison capacity programme is also nearing completion, with 56 of the 58 projects completed on schedule. New accommodation had reduced operational costs for NOMS.[183]
  • Probation estate: 32 of the planned reduction of 100 properties had closed by November 2011. This should deliver savings of £6 million a year.

150.  London has 8,000-plus prisoners and only 4,000 prison places which means that a large number of London prisoners are housed in East Anglia or on the Isle of Wight. We raised with Michael Spurr, Chief Executive, NOMS, the possibility of selling off old prisons within London, which were of potentially high value, and replacing them with new fit-for-purpose prisons just outside London. His response was that NOMS was looking into it alongside analytical colleagues in the MoJ, but that the land value for many London sites was not as great as people assumed it would be.[184]

151.  We asked about how the Department seeks to maximise value from sales of surplus estate. The Department told us that its Asset Realisation Programme aimed to identify up to £300 million of capital receipts of which the MoJ would be able to retain sale proceeds of up to £250 million plus 20% during the spending review, with any excess returning to the Consolidated Fund.[185]

152.  In order to maximise the sale value of land, the MoJ sought to obtain planning permission prior to sale. On occasions it had also put clauses into the contract of sale such that, if the person buying it subsequently got planning permission and increased the value, the MoJ would have a claw­back provision. However, the Department admitted that there was not currently a buoyant market for their estate.[186]

153.  There remains significant scope for rationalising and improving the prison estate, which should continue to be pursued while taking full account of the available evidence of the impact of prison location on the effectiveness of rehabilitation. It is essential that when the Ministry chooses to sell off parts of its estate it receives the best possible value. Furthermore, it should ensure that where land or property may appreciate it has in place appropriate claw-back provisions in all cases.

154.  The Department told us it would ensure it has sufficient prison places to deliver criminal justice and as part of this will build additional capacity where necessary.[187] This commitment represents a significant challenge for the Department if it is to rationalise its estate and reduce accommodation costs. In October 2010, Kenneth Clarke MP pledged to cut the numbers in prison to 85,000 over the next four years,[188] but the population had exceeded 88,000 by December 2011.[189]

155.  NOMS monitors immediate population pressures closely and provides additional accommodation where necessary to ensure that there are always sufficient places to manage all those committed to custody by the courts. Measures available to increase capacity in the short-term include: bringing forward the availability of new or out of use accommodation earlier than planned; postponing planned maintenance work; cell reclaims or rapid delivery conversion projects requiring limited investment; and additional crowding where it is safe and decent to do so.[190]

156.  Our predecessor Committee concluded the following in its 2009 Report, Cutting crime: the case for justice reinvestment:

The Government has spent too much time pursuing an unrealistic attempt to build its way out of the prisons crisis. Lord Carter's review of prisons, and the stark demonstration of the exorbitant costs of penal expansion, should have been seen as a watershed and a warning against the "predict and provide" approach to criminal justice policy. The reaction against the proposed Titan prisons should be seized by the Government as an opportunity to switch direction and halt the seemingly inexorable growth of imprisonment.[191]

157.  In the summary of that Report the Committee set out two paths:

We believe the Government faces a choice of risks: either to muddle through with the current plans hoping that commitments made under the 'predict and provide' model of penal policy will prove affordable (and not merely a self-fulfilling prophecy); or to make more radical decisions, and investments, putting the system on a sustainable footing over the longer term by shifting resources away from incarceration towards rehabilitation and 'prehabilitation'.[192]

158.  As referred to in paragraph 151, we asked Michael Spurr about the possibility of replacing old prisons with new fit-for-purpose ones to which he said "over the last 10 or 15 years the Department had to build prisons wherever it had the ability to build quickly because it had been trying to avoid people being kept in police cells instead."[193] We also asked him whether structures within NOMS failed to create the coherent drive for a long term prison estates strategy. At the moment the Prison Service is a national service whilst probation trusts are localised. It was put to Michael Spurr that if there were single payment by results contracts across each region for both prison and probation, there would be economic drivers in the system to create the prison places in the locations they were needed, rather than the current situation of matching prisoners to where the prison spaces were. His response was that space was required to be able to develop those structures at a local level but because the prison population ran at such a high level every prison place was required, so that space was never available.[194]

159.  While our emphasis in this Report is on managerial and operational issues, we need to re-iterate a policy concern which lies at the heart of the MoJ's work. The Government appears to be locked into the 'predict and provide' model of prison provision which characterised its predecessors. There is a disturbing anomaly at the core of our criminal justice system: if a sentence says that a criminal is to be imprisoned, the Government accepts as an unarguable imperative that a prison place must be provided. No such imperative exists in relation to non-custodial sentences. Despite Parliament legislating for the provision of a plethora of non-custodial options, sentencers are routinely restricted from stipulating that these options should be attached to sentences, because the money is not available to pay for them. This approach demonstrates indifference to the views of legislators and an unacceptable curtailment of judicial choice. The present Departmental structure needs to be reformed so that it does not inhibit effective sentencing, be that custodial, non-custodial, or a combination of the two. Proper consideration should be given to the possibility of local commissioning of both custodial and non-custodial provision.

160.  The MoJ intends to reduce Central London properties from 18 to a maximum of four. When we visited, floors of its Petty France headquarters building were being cleared to make space for the LSC. The YJB, although it will be deemed to have its own headquarters, will also be moving into Petty France.[195]

161.  Consolidating the MoJ's headquarters is a good idea. First, it will free up unnecessary office space that can then be disposed of. Second, as more bodies use the main headquarters they too can draw on the shared services facilities available. Third, it should help the separate bodies, agencies and the core Department collaborate more effectively and reduce any possible barriers that physical distance may bring. We recommend that the Department speeds up its consolidation of headquarters, bringing in all appropriate NDPBs.

Targeted IT changes

162.  The complexity and history of the MoJ organisation - as well as that of some of its Arm's Length Bodies - has resulted in the wide number of IT systems in use. In 2010-11, the estimated annual cost of Information and Communication Technology (ICT) to the MoJ was £590 million which included shared services, the Legal Services Commission, and the major Arm's Length Bodies such as the Youth Justice Board.[196] In its ICT strategy, the MoJ summarises that challenges it faces:

The current MoJ ICT estate is large, complex and aging. A number of case management systems have been in place for many years and are using legacy technology which inhibits our ability to respond to business change. Communication channels with citizens are often paper based which is expensive in terms of storage, manual re-keying of data and checking of forms, paper and scanning costs. We run multiple different infrastructure networks and desktops where some applications can only run on one infrastructure which inhibits our ability for staff to work flexibly.[197]

163.  The MoJ recognised that to meet Spending Review targets of reducing its budget by 23% by 2014-15 would necessitate radically new ways of working. Cost reduction is the primary driver behind the MoJ's strategic IT plan, but it is also important that ICT supports other MoJ initiatives such as the rehabilitation revolution, modernising courts, reforming legal aid and improving front-line services. The Department's view is that best value can be achieved by providing shared ICT services with local solutions. The MoJ told us it was trying to improve its ICT capability within the 'better for less' framework:

Our ICT Transformation Programme was completed last year, and whilst maintaining levels of operational service and improving project delivery it contributed to more than £20 million of cost savings. Over the next 3-5 years it is intended to further reduce 'run and maintain' ICT costs by over £100 million through replacing or renewing all major ICT supplier contracts under our Future ICT Sourcing (FITS) programme. In procuring by service tower we will standardise services across MoJ, making them much more economic.[198]

164.  The Law Society told us that there was a long history of underinvestment in court ICT. Civil courts remained under-resourced in terms of both staff and IT and the problems were being exacerbated by expenditure cuts. The Society claimed it was difficult to evaluate the MoJ's use of IT because of: the complex history of MoJ IT; its inheritance of legacy systems in 2007; and the changing landscape of overall Government ICT strategy.[199] The Prison Reform Trust highlighted the potential benefits from better use of IT, such as: cutting costs; better allocation of staff time and resources; and benefitting prisoners in terms of access to educational resources, resettlement materials and family contact.[200]

165.  The Law Society expressed concerns that current systems were inadequate for the purposes of policy making. Inadequate and outdated IT systems in the LSC had created problems in processing and gathering data. This, the Law Society told us, may be due to an apparent disconnection between business strategy and IT strategy within the MoJ, with no ICT plans outlined in the MoJ's Business Plan 2011-2015. At our request, the MoJ subsequently supplied us with its first ICT strategy, published in March 2011. The Institute of Government also commented that policy-makers were not able to use operational data for policy decisions and relied instead on models that estimated system flows and impacts. The MoJ sought to tackle long-term data and systems problems by including a 'management information' programme in its Transforming Justice work.[201] The Prison Reform Trust also commented that IT decision-making in the prison estate was hit and miss and left to area managers.

166.  Jack Straw explained that there was a continuing problem about information systems that do not join up.[202] He told us that in 1997 the Home Office had promised "all-singing, all-dancing IT systems in the next couple of years" in relation to criminal justice. However, when he became Secretary of State for Justice, ten years later, he found they were not around, and there were problems regarding IT systems joining up.[203]

167.  The Prison Reform Trust told us that if the criminal justice system was to act as a proper system, a pre-requisite was a single information base. It claimed that information was not effectively shared which increased bureaucracy through repeated form filling or requests for the same information.[204] However, Peter Handcock told us that good progress is now being made on the electronic transmission of data around the system. The Criminal Justice Efficiency Programme, which is a joint effort between the CPS, the police and HMCTS, is now delivering the comprehensive electronic transfer of documentation around the system.

168.  We were told that by April 2012, all movement of paper between police, CPS and magistrates' courts would be done electronically, replacing old paper systems. It was not a massively complicated IT system, but required the use of something like digital vault technology from which users could download data into their own systems. It would take some time to get similar technology into the Crown Court.[205] There would also be police to court video-links in place in every magistrates' court in the country and every Crown Court room in the country by the end of the next financial year, enabling people to give evidence without necessarily being moved from prison.

169.  In taking forward major IT programmes, the MoJ told us that it recognises the need to be aware of lessons learned from previous ICT implementations. Following criticisms of NOMS initiation of the National Offender Management Information System (C-NOMIS) in 2009, the MoJ changed the way that it managed IT projects. The project was designed to introduce a single offender management IT system across prisons and probation trusts by 2008. The Committee of Public Accounts found that delays and cost overruns had led to a waste of £41 million, and no-one had been held to account for the failure.[206]

170.  The Department told us that since the Committee of Public Accounts' Report it had taken a number of actions, including:

  • dividing the successor programme (known as the NOMIS Programme) into more manageable elements;
  • mapping and standardising business processes where possible;
  • recruiting a senior management team with extensive experience in delivering IT-enabled change;
  • introducing a simplified governance structure with clear reporting and escalation procedures in accordance with PRINCE2 and Managing Successful Programmes principles;
  • developing more robust processes to manage planning, change control and risks/issues;
  • establishing a dedicated financial team;
  • awarding fixed price contracts; and
  • using earned value analysis to align expenditure with deliverables.

Three of the five projects in the NOMIS Programme had been delivered successfully. However, the remaining two projects were particularly complex because they involved introducing standardised systems across the Probation Trusts in which there were particular legacy related challenges.[207]

171.  The MoJ told us that it was developing the capability of its own workforce. A senior team member had been recruited with wide experience from both public and private sectors. The Department also told us that it was updating its ICT operating model, changing its supplier model from one in which a full range of services was bought from prime contractors by line of business, to one which was multi-supplier 'Service Tower' based. It was also active in the delivery of the Government ICT Strategy, taking a lead in a number of areas such as cloud computing, data centre rationalisation, as well as contributing to others such as the Public Services Network and Green ICT, all of which have the potential to realise new ways of delivering more with less resource.[208]

172.  We welcome the Ministry's commitment to securing 'better for less' from its ICT and the improvements that are already in hand. For the future, we recommend that ICT should be an integral part of the MoJ's business strategy. At a time when funds are scarce it is essential that the MoJ knows where to target improvements so that the greatest benefit can be achieved through the minimum cost.

173.  We welcome the improvements made to project management, following criticisms related to the C-NOMIS project. ICT projects in central Government are renowned for their ability to be delayed, go over budget, and not deliver what was initially intended. Better project management should help to keep control of the ICT projects the MoJ chooses to proceed with. We recommend that for any future ICT projects the Project and Programme Management Leader be appointed on the basis that, wherever possible, they will follow that project from inception to implementation, and be the senior responsible owner for it.

174.  During our visit to the Legal Services Commission we were left under the impression that it was very hesitant about securing innovation from its client solicitors. The Chief Executive acknowledged that, as they moved to the digital submission of legal aid claims, a reliable system needed to be in place, and users needed to gain confidence in it.[209] The Law Society indicated there was no issue for legal aid providers with working online:

The overwhelming bulk of the profession now works online. Certainly, if you are doing commercial work or any work for a private client, the chances are that you will be using e-mail and such IT systems as are available. What we would love from the Courts Service is a clear direction which enables our members to invest in particular areas.[210]

175.  There is no excuse for the Legal Services Commission's failure to implement a system of online submissions by solicitors and we recognise that the Law Society suggests providers to the MoJ are willing to adhere to a fully online process. For future contracts there should be no choice for providers but to interact with the MoJ in a way that achieves the greatest efficiency. This should be decided at an early stage, so that a clear and certain message can be delivered to providers, the minor practical problems can be overcome, and providers can be confident in making the necessary investment decisions.

Income generation

176.  One of the main achievements of the Transforming Justice programme has been the establishment of shared services centres, where corporate services are provided across the MoJ. Sir Suma told the Public Administration Committee shared services had cut down the replication of back office functions across Arm's Length Bodies. He also highlighted the shared service centre in Newport from which the Home Office had begun to purchase services.[211]

177.  We urge the Department to promote its shared service centres to other Government departments, in order to gain additional income.

178.  In January 2011, in its Report on Financial Management, the Committee of Public Accounts concluded that "fee recovery and fines collection have to be priority areas for improvement" and that the Ministry should be setting civil (magistrates' courts) and family court fees to achieve 100% cost recovery. [212] In 2009-10 the MoJ recovered around 82% of the cost for Family Court and Civil (Magistrates' Court) business. In January 2012, when he appeared before both ourselves and the PAC, the then Permanent Secretary acknowledged that there were complications in the fee structure which was not achieving 100% cost recovery. The MoJ expected to bridge the gap between fees and costs in civil and family cases by the end of 2014-15.[213] Ursula Brennan told us that in 2011-12 the fee recovery rate had increased to 85%, and the MoJ was on course to meet its target.[214]

179.  Peter Handcock told us that previously relatively little commercial acumen was applied to this process and generating more income had always been a matter of putting up the price, which led to fewer people using the courts.[215] The MoJ has since told us that research on the sensitivity of civil and family court users to changing fee levels concluded that, overall, individuals felt that cost played a minor role in their initial decision to go to court—ranking eighth out of a list of nine factors. However, there was evidence that the level of fee charged could have an impact in some instances. For example, in 2008 increases to the two tier fee charging structure for warrants of enforcement resulted in a substantial drop in their use. Feedback from users confirmed they had changed their approach because the increased fee had made debt collection no longer cost effective.[216]

180.  It is right that the Department is trying to achieve full cost recovery for court fees. However, there is a danger that higher fees can act as a disincentive for individuals seeking access to justice. Therefore we welcome the Ministry's approach to reducing costs so they match as low a fee as possible. The impact of higher fees on demand should be recorded and analysed so as to inform fully future decisions on fees.

181.  In 2010-11, fines imposed amounted to £413 million and the MoJ collected £395 million, of which it retained its share of about £100 million. Fines outstanding have increased year on year and exceeded £600 million in 2010-11. Peter Handcock told us that pilot exercises, where private sector companies tried to collect fine debts and retained a proportion for themselves, were looking promising. He considered they had been more successful as the private sector had invested in the types of technology that enabled them to take on this task more effectively.[217] The MoJ later informed us that although more fine defaulters would be traced, this would not return much income to the Department because of the low value of the fines. However, in terms of increased confidence in fines as a method of punishment, this was action worth taking if a significant proportion of fine defaulters could be traced and made to pay, and returns exceeded cost.[218]

182.  Although it may not generate a large amount of income, the work of the aged debt pilots seems to be having a level of success by making offenders pay. It is important that there is confidence that methods of punishment used in the justice system are carried out. In response to this Report, we ask the Ministry to set out how these pilots will be taken forward, and whether a similar approach would be beneficial in relation to other areas of fine collection.

183.  When we visited NOMS headquarters we were told that it had investigated what could be gained from selling some of its services to overseas Governments. One example was that the Saudi Arabian Government wished to purchase prison officer training from the Department.

184.  The Department has also been promoting legal services exports, which totalled £3.6 billion in 2010, as part of the MoJ's Plan for Growth. It described how the MoJ would work with industry experts to encourage growth in the legal services sector, specifically by the UK as a centre of excellence for dispute resolution. The Unlocking Disputes campaign was launched in October 2011 and, targeting international business leaders, the campaign highlighted and promoted: the UK's unrivalled professional expertise; the quality of English law; the independence of the judiciary; and the world-class facilities offered through the Rolls Building. The Department believe that this approach of marketing the totality of the UK's offer is the key to success.[219]

185.  The Ministry is taking some interesting steps in promoting both its own services and the wider justice system to an international audience. It is not clear to us whether the Department has analysed all its activities to assess which might have a commercial appeal domestically and internationally. We recommend it should do so and that a senior leader in the organisation be appointed to champion this work across all business units within it.

Outsourced services

186.  In the 2010-11 financial year the MoJ spent £3.1billion on services, supplies, utilities and works procured from external sources (excluding legal aid). The breadth of procured services spanned from the building and operation of prisons through to janitorial supplies. The Department told us that at any one time there were over one hundred procurement projects underway.[220]

187.  The Ministry's procurement function originated in NOMS, which began major reforms in this area in 2004. In 2008, the National Audit Office reported that procurement was well delivered and had made substantial savings. Since 2010, the remit of the procurement function has continued to expand within the wider MoJ. The Committee of Public Accounts reported that the MoJ understood the cost of most of its goods and services and was able to drive savings and mitigate cost increases.[221] The MoJ's procurement directorate was the first central Government department to achieve the 'Standard of Excellence' from the Chartered Institute of Purchasing and Supply.[222]

188.  The Department told us that through a programme of competition and renegotiation, it had saved £49.9 million in 2009-10; £84.2 million in 2010-11; and a forecast £93 million in 2011-12. At the same time the cost of the MoJ's procurement operation has decreased from £21.5 million in 2007-08 to £18.6 million in 2010-11, despite its competition programme expanding significantly.[223]

189.  Since the Spending Review, and the ethos of 'better for less' there has been an increased emphasis on having a functioning market for the provision of as many justice services as possible. The MoJ has set out its strategic principles for competition in the Offender Services Competition Strategy. These are:

  • competition activity should be focused on achieving mid to long-term savings, not finding the cheapest solution at the expense of quality;
  • competition should be used to deliver public sector reforms, ensuring providers are more effectively held to account for the outcomes they deliver;
  • providers should be involved early to identify where efficiencies could be realised in national or process-based functions through competition;
  • small and medium sized enterprises (SMEs) and the voluntary and community sector (VCS) should be encouraged to participate to drive innovation; and
  • competition should be widely applied, with public sector providers allowed to bid where the Department is competing localised services and robustly held to account where successful.

190.  Kenneth Clarke MP, Secretary of State, gave an indication of the MoJ's direction of travel in competing services to external providers in the Department's Business Plan 2011-15:

Lastly, the Ministry of Justice will work very differently. There will be a functioning market in the provision of legal aid, offender management and rehabilitation. Our aim will be to ensure that justice services are provided by whoever can most effectively and efficiently meet public demand. We will not pay for good intentions, or for ticking procedural boxes, but by the results achieved.[224]

The Prison Reform Trust told us that:

the Justice Secretary is very keen on competition and sees that as a driver to improving standards, the plan is to bring forward to competition a group of prisons, followed by another group of prisons, followed by another group of prisons, and to have a competitive tendering exercise to improve standards.[225]

191.  The Prison Reform Trust also raised concerns about the regulation of the private sector, and suggested that if firms were working towards economies of scale there might not be the same attention to detail as in the public sector, and that standards could fall.[226] In November 2011, the Independent Monitoring Board Report on HMP Birmingham concluded that following that prison's transition to the private sector its culture would be different as it would be run as a business by G4S and be answerable to shareholders.[227] G4S told us that private sector providers were already more regularly inspected than in the public sector and they were often more transparent due to contractual requirements and information shared with the Government.[228]

192.  In recent years there have been attempts to extend the scope of the Freedom of Information Act 2000 to cover the provision of public services that have been contracted to private sector companies. For example, the Freedom of Information (Amendment) Bill 2010 proposed the extension of FOI to contractors, but the Bill did not gain a Second reading.[229] Currently, while private companies providing public services under contract are not subject to FOI, information held by contractors may also be brought within the scope of FOI where it is held "on behalf of" the contracting authority in accordance with section 3(2)(b) of the Act.[230]

193.  We have recently conducted post-legislative scrutiny of the Act, and considered how information about the provision of public functions should apply in the likely case that an increased number of these functions are competed, and subsequently provided by private companies, not subject to the Act. We repeat our conclusion here; namely that:

The right to access information must not be undermined by the increased use of private providers in delivering public services. The evidence we have received suggests that the use of contractual terms to protect the right to access information is currently working relatively well. We note the indication that some public bodies may be reluctant to take action if a private provider compliant with all other contractual terms fails to honour its obligations in this area. In a rapidly changing commissioning landscape this has the potential fundamentally to undermine the Act. We remind all concerned that the right to access information is crucial to ensuring accountability and transparency for the spending of taxpayers' money, and that contracts for private or voluntary sector provision of public services should always contain clear and enforceable obligations which enable the commissioning authority to meet FOI requirements.

We believe that contracts provide a more practical basis for applying FOI to outsourced services than partial designation of commercial companies under section 5 of the Act, although it may be necessary to use designation powers if contract provisions are not put in place and enforced. We recommend that the Information Commissioner monitors complaints and applications for guidance in this area to him from public authorities.[231]

THE MINISTRY'S COMMISSIONING PROCESS

194.  The Prison Reform Trust told us it envisaged the MoJ as an organisation comparatively light at the centre but highly skilled and experienced. In order to achieve this the Department would require excellent commissioning and outsourcing capacity.[232] However, it was unconvinced that the current arrangements for commissioning and contracting were adequately developed or that they incorporated the necessary checks and balances that the MoJ would like to see, and said it was not evident that many officials had the highly developed skills or knowledge base necessary to set contracts and objectives.[233] The Law Society was also unconvinced that the relevant procedures or expertise were in place to achieve value for money through commissioning and contracting.[234]

195.  The Justice Secretary told us that developing the capacity of people to commission was important. The MoJ was conscious of the dangers of inexperienced staff working in this area, which included entering into contracts that were extremely profitable for the contractors or which produced perverse incentives, and therefore it was working out how to develop that capacity.[235] In written evidence to the Public Administration Committee, the Permanent Secretary said the MoJ was committed to acquiring and retaining the expertise necessary to carry out their reforms, and as part of the Transforming Justice programme they were reviewing how the MoJ commissioned services. This would include exploring whether the right skills were in the right place in order to achieve efficient and effective commissioning and contracting of services over the next 5-10 years.[236]

196.  We reiterate our earlier recommendation that the Department needs to convince us in its response that it has the necessary skills to deliver its plans for increased competition of services, and to set out the steps it has already taken and will be taking to ensure its workforce has the necessary capabilities. The review of how the Department commissions services should involve an independent assessment of capability by those used to implementing best practice in the private sector. We call on the Government to let us have access to the full findings of this review as soon as it is available.

197.  G4S gave a positive view of the MoJ's competition processes which it described as "a lot more professional, with more structure, more clarity and forward visibility in its procurement and tendering opportunities".[237] It was also encouraged by the MoJ's rolling programme of competition which gave new and existing providers time to prepare their offering and secure long term funding. They believed this approach should be adopted by all Government departments.[238]

198.  G4S believed that there was also significant opportunity to improve. Firstly, on some projects the pace of progress was painfully slow, which presented missed opportunities to speedily put in place a new service that could give better value for money for the taxpayer.[239] The Independent Monitoring Board's report on HMP Birmingham gave the example of the poor transition of that prison from the public sector to be managed by G4S. The process took nearly three years, and the final announcement was poorly handled. These delays and uncertainties had an adverse effect on the morale of staff and prisoners.[240] In oral evidence, G4S informed the Committee that the delays were within the MoJ,[241] and HM Chief Inspector of Prisons has since reported that most staff were relieved the transition process was over and looked forward to a more stable and positive future.[242]

199.  'Over-engineering' of contracts was another issue raised during our evidence sessions. G4S explained that at times there was a tendency to over-engineer and over-complicate the approach to procurement, such as by using the competitive dialogue procedure for a £4 million a year contract to provide juvenile escorting. G4S argued that £4 million a year was a relatively small contract, and the MoJ would end up procuring something that was broadly similar to what it had in place, and yet it was embarking on a process that would take the best part of a year and consume huge resources, both on the side of the bidder and the Department, in terms of the procurement process.[243]

200.  Thebigword, an established provider of language services, which unsuccessfully tendered for the Language Services Framework agreement, highlighted the complexity of the competitive dialogue process. 126 suppliers had been invited to submit a pre-qualification questionnaire, 77 accepted and 58 fully completed a tender. Thebigword commented as follows:

The pre-qualifying questionnaire clearly did not do its job. It should have weeded out on financial robustness, ensuring that only those suppliers with the ability to deliver the service went forward. [...] [T]he competitive dialogue for this particular framework was cumbersome and overcomplicated, and it had numerous stages; it lasted well over nine months. [...] [W]e got to the penultimate round, and, although it was made very clear when the stages would take place and whether it would be a written response or a dialogue, we were never really clear about what was expected at each stage. It was a process of elimination, but you did not realise who had gone or why or what they were being assessed on. When we got confirmation that we had not made it to the final round it came as a surprise, because we were still expecting at that stage that the final evaluation would take place and there would be other organisations involved. It seemed strange that you could have a final round with only one organisation.[244]

201.  The Law Society was critical of the tendering process for provision in the Legal Aid, Sentencing and Punishment of Offenders Bill.[245] The Committee received written evidence from the Citizens Advice Bureau in 2010, at the time of civil aid contract tendering. They set out a number of recurrent substantive and procedural problems, including: selection criteria; delays at all stages of the process; late availability of information; quality of information available; and mistakes.[246] On 20 September 2010, the High Court ruled that the competitive procurement process adopted by the LSC to award these contracts was unlawful. This example followed a previous flawed tendering processes for immigration removal centres abandoned in March 2009 after running for eight months.

202.  Matthew Coats, Chief Executive, LSC, explained to us the uniquely challenging commercial environment it operated in, placing contracts with several thousand legal firms:

[I]n the last two years we have either had litigation threatened or brought against our tender activity on 72 occasions. In that time we have had two adverse judgements in just two of these cases. We therefore have to ensure that our commissioning approach is legally robust — and it would be fair to say that on occasions this has constrained our approach to commissioning services.[247]

203.  The MoJ told us that the transition of the LSC to Agency status would allow it to focus on developing skills and expertise in the areas for which it had responsibility (commissioning and administering legal aid services) rather than having to focus on a wider range of areas including policy development.[248] Sir Suma told us that the MoJ would look at what more they could do to improve the LSC's commissioning, but added that they felt it was moving in the right direction. He added "there is an interesting issue [...] about to what extent you can use LSC contracts in future to drive the mandatory use of secure e­mail, for example. Again, I think that would save costs. That is one we are exploring now for future contracts".[249]

204.  Pact are a small charity which was unsuccessful in bidding for the provision of Prison Visitor Centres. It criticised the MoJ's tendering processes for a lack of explanation at several stages, giving the example of one service being put out to tender and then withdrawn after they had submitted an application. It also raised specific queries on how the criteria such as values, track record and added value had been applied.[250] However, the successful bidder for the centres, Spurgeons, were positive about the approach the commissioners took, and said there was a good dialogue and feedback between both parties.[251]

205.  Spurgeons also commented on what more could be done by commissioners in the MoJ:

We feel it is important for commissioners to engage with potential providers prior to the start of procurement processes in order to consult and shape commissioning priorities as well as providing opportunities to bring organisations together who may be able to form effective partnerships or consortiums as service providers.

We would also welcome greater contestability from within MoJ and NOMS commissioning. The majority of services we have seen advertised for tendering have been existing contracts or re-shaped services delivered by voluntary organisations and would welcome the opportunity to compete for the delivery of services currently provided in-house.[252]

206.  G4S told us that it was important that there was a clear commissioner/provider split in the interest of transparency. They gave the example that NOMS acts both as a commissioner of services and as a provider though HM Prison Service. The MoJ's competition strategy emphasised that it was important that appropriate 'ethical walls' were in place to ensure fair treatment for all providers. G4S added that this had to be guarded at all times and a clear commissioner/provider split needed to be ensured when looking at opening up public services in other areas, such as the role of Probation Trusts as both commissioner and provider of services.[253]

207.  The Law Society was also concerned that the administrative overhead of maintaining a legal aid contract was a significant disincentive, particularly for small businesses. The constant process of significant change since 2000 had made it difficult for providers to plan for the future. The Law Society also claimed that the LSC was micromanaging providers through the intrusive manner in which it ran legal aid contracts, often by specifying the minutiae of how things should be done. The Law Society concluded that the agency responsible for legal aid should be managing the system overall, not each individual case within it, and that providers should have a broader discretion as to how work under the contract was performed.[254]

208.  The Ministry of Justice has to improve extensively its commissioning and outsourcing processes. From the evidence we have received it appears that despite alleged improvements there are still too many faults with their contracts.

209.  We recommend that the Department makes use of the knowledge and expertise of its provider firms at the outset of devising a new contract. The examples of problems within the MoJ's commissioning show a tendency for them to be poorly designed. It seems clear that the Department has insufficient experience and skills to commission effectively, so the MoJ should draw upon the experience of others.

210.  We recommend that once the Department has designed its competition process, more is done to make the stages clear to the potential bidders. In addition every stage must be robust and transparent, and each stage must whittle the contenders down by an appropriate amount. The commissioning process involves a lot of resources both for the MoJ and the bidders, so unrealistic applications should be removed at the earliest stage, and only those with a serious chance of providing the competed service should reach the latter stages.

211.  Several witnesses have told us that the Ministry uses the competitive dialogue approach inappropriately. This again suggests that those designing the commissioning process are inexperienced about when to use alternative methods. We welcome the Department's recent commitment to move towards the less onerous, and more open and negotiated procedure.

212.  The Ministry does not give unsuccessful bidders sufficient and appropriate feedback. Feedback is important so that bidders can adapt more easily to provide the type of services the MoJ wants, and as such the Department will have a greater choice of future providers. Good feedback is also important as it gives the MoJ the opportunity to display it has made a transparent decision about the contract objectively, and has therefore run an open competition process. We recommend that the MoJ reviews its guidance for feedback so that it is part of a meaningful process for the bidders.

213.  Outsourcing for the Language Services Framework agreement attracted much criticism because of the difficulties faced by the new contractor in getting the new services in place.

214.  The Language Services Framework Agreement has been in place nationally for HMCTS since February 2012. It is not clear whether the very serious problems experienced at the start of the contract have been resolved, or are in the process of being resolved. We intend to take evidence on this matter in October.

SMALL AND MEDIUM SIZED ENTERPRISES AND THE VOLUNTARY AND COMMUNITY SECTOR

215.  The MoJ told us that through its strategic principles for competition it was encouraging small and medium sized enterprises (SMEs) and the voluntary and community sector (VCS) to participate in competitions, particularly in order to drive innovation in service delivery. They aim to ensure that commissioning arrangements level the 'playing field' for voluntary organisations. Where it was not possible or desirable to open competitions directly to smaller enterprises, the MoJ said it would work with larger providers to ensure that the right incentives were in place for them to encourage SME and voluntary specialist providers in their supply chain.[255]

216.  The National Council for Voluntary Organisations (NCVO) has examined Departmental Business Plans, which require the disclosure of spending on the voluntary sector. In 2010-11, the MoJ had contracts to the value of £39.5 million with the voluntary sector, but could not provide figures on its grants to that sector.[256]

217.  Sir Suma told us that 33% of the MoJ's Departmental spend went to SMEs, and the MoJ was the best performer across Government on this. He said there had been difficulties around the cost and duration of competitions, so the MoJ removed pre­qualification for transactions under £100,000, which SMEs and the voluntary sector were more likely to bid for, and had also moved from a competitive dialogue process to a the less onerous, open and negotiated procedure, which helped smaller companies much more. He added that the MoJ had to pay quickly to the smallest subcontractors because of the cash-flow issues they faced. It was trying to pilot a project bank account to speed up the payment process.[257]

218.  We welcome the steps the MoJ is taking to use small and medium sized enterprises and the voluntary and community sector. In response to this Report, we request an assessment of how the MoJ has reached the figure of 33% of its Departmental spend going to small and medium enterprises.

219.  The Howard League told us of its extreme concern about contracting out in the criminal justice sector. It stated that the commissioning process was bureaucratic, expensive and heavily weighted towards large organisations, who could undercut the smaller charities who had local knowledge and expertise. Voluntary organisations were then forced either to take on roles as subcontractors, or not compete. It argued that this undermined the 'Big Society' rhetoric, as the reality was big business delivering poor quality services at bargain rates.[258]

220.  The Prison Reform Trust told us there were two major structural impediments which undermined the involvement of the voluntary sector in the criminal justice system. These were: risk-averse policies; and uncertain funding arrangements. They suggested it would be useful to join up work on the Big Society and its emphasis on the importance of volunteering to avoid an unintended consequence of reducing small voluntary organisations to sub prime contractors of either the large voluntaries or the private sector. This threatened the viability of many small to medium charities both in terms of their resources and maintenance of their unique identity.[259]

221.  In particular, the Trust claimed the commissioning relationship with NOMS was exploitative, to the extent that smaller, local charities could not survive if they tried to provide a service to offenders and their families. NOMS commissioning favoured large organisations on the presumption that the lowest cost per head conferred value for money; and arrangements in particular prisons were short-term, such that the voluntary sector partner assumed a long-term risk of loss of funding. They additionally said that the few prison governors who recognised the contribution which the voluntary sector made were forced to take extraordinary steps to promote voluntary sector involvement in the prison; and for this, they received no acknowledgement in terms of career advancement.[260]

222.  Liberata, a leading provider of business process services, told us that the size and scale of some outsourcing opportunities precluded many organisations from competing. However, it recognised that a number of procurement frameworks were emerging that would enable SMEs to compete effectively using their niche expertise.[261]

223.  Spurgeons —a medium-sized charity—argued that "larger contracts are often harder for small organisations to compete for due to the risks and liabilities that present themselves. But equally small contracts close the market opportunity for larger organisations as they are not financially viable to consider". They also suggested that 'large' did not mean remote and detached from the local and welcomed commissioning approaches that did not pre-judge the capability of organisations based on their size.[262]

224.  Kenneth Clarke MP told us the MoJ wanted "voluntary not­for­profit local organisations to take part in some areas like cutting the reoffending rate of criminal offenders". It was important that the MoJ used them, but it was difficult to fit them in. He said there was a tension between cost saving, which tended to argue in favour of block contracts covering large parts of the country, and the local focus that was wanted. He gave the example of prisons as the area that was furthest developed and said it tended to be large companies that came in with leading consortia. They then generally subcontracted the actual delivery to charities and not­for­profit organisations.[263]

225.  Clinks is an organisation that provides infrastructure support to the Voluntary and Community Sector working with offenders across England and Wales. It chairs the Ministry of Justice Reducing Reoffending Third Sector Advisory Group (RR3). The RR3 provides advice to ministers and officials on reducing re-offending from a diverse voluntary sector perspective and presents views and concerns about future priorities, issues and policies which might affect the sector.[264] In the introduction to its most recent Annual Report, Dame Anne Owers, Chair, Clinks, summed up the challenges the voluntary sector faced in 2010-11:

At national level, the combination of large-scale contracting and back-loaded payment by results has excluded many VCS organisations or confined them to the role of sub-contractors, operating under a private sector prime provider. … In the immediate future many organisations will struggle to survive and others will face difficult choices between delivering sub-optimal services or none at all. [...] It is vital that the Sector's distinctive characteristics—its independence, responsiveness and capacity to innovate—are not lost.

226.  In addition, Clive Martin, Director, stated:

Clinks has been monitoring the impact of the economic downturn. The most recent results indicate that the majority of the Sector has avoided the cliff edge which loomed at the end of the financial year in 2011, but many are still perilously close. It is deeply worrying that 77% of respondents are relying on reserves to run, which is symptomatic of a slow but steady erosion of the Sector.[265]

When Mr Martin appeared before us he said:

Over the past 10 years a lot of expectation has been built up about criminal justice reform, particularly in prison and probation, and the role of the voluntary sector in helping deliver that reform mainly through commissioning. We had regional offender managers and so on and so forth. None of that has really been achieved or has brought about the success that the voluntary sector anticipated. There is a fair amount of cynicism in the sector to begin with, with an understanding that the needs of offenders and communities particularly are growing at the same time. That has then been overlaid by the cuts and different reforms.[266]

227.  The Panel on the Independence of the Voluntary Sector, a commission set up to monitor the voluntary sector, said service provider charities that traditionally also had an advocacy role were censoring their public utterances for fear of the response from local authority and central Government funders. It said, "some organisations that rely on state funding are fearful of challenging Government or local authorities, in case this could lead to reprisals" and warned that charities' contributions to society could be eroded if safeguards were not introduced to preserve their independent voice.[267]

228.  The Department appears to be sending mixed messages about how it wants to engage with small and medium sized enterprises and the voluntary sector. On the one hand it has done some good work to increase its spending to them, and it is trying to change its processes so they can more easily do business with the Department; on the other hand, there seems to be an general impression that the Department will move to a system whereby they set a prime contract with a large organisation, leaving it to the prime contractor to interact with SMEs and the voluntary sector. We further examine the difficulties this presents, and how these can be mitigated. We call on the Ministry to give a clear message about the circumstances in which it will opt to engage directly with SMEs and the voluntary sector.

229.  Clinks told us there was a requirement for voluntary organisations to take on a 'brokering role' in bringing together the local voluntary sector and statutory partners. They gave the example of Devon Reform, a new forum of voluntary organisations working across Devon, Plymouth and Torbay, which was seeking to enable consortium bidding by small and medium voluntary organisations.[268] During evidence they told us that the drive for consortia in the sector was key as contracts are scaled up, but that it also made sense in terms of reforming offenders so a joined-up system of referrals from housing to drug-addiction programmes to education and employment, spanning across the whole range of services that might be needed, could be facilitated. However, the problem in the past with forming consortia was to do with lead responsibility, risk and capacity. From a commissioning point of view there had always been a need for one responsible agent. In addition, commissioners had been reluctant to contract to a consortium that did not have a credible or past history of development.[269]

230.  The National Council for Voluntary Organisations told us if contracts were issued at a very large scale, then that pushed organisations to collaborative working or consortia, but there is no reason per se why working in consortia was better than organisations working separately to deliver smaller contracts. The NCVO did see enormous benefits of collaborative working in the sector, and they encouraged organisations to consider forming them although they raised challenges for the organisations.[270]

231.  We recommend that the Ministry assesses how it might aid the voluntary sector in bringing together organisations to form consortia for those contracts it issues at a large scale that prohibits smaller organisations competing for them on their own.

232.  G4S told us in terms of the Voluntary sector:

[there were not] any contractual obligations saying that we must source from [...] voluntary organisations. However, it is extremely clear that, in order to be competitive and to bid successfully for offender services, we need to harness the talents that exist across the whole range of SMEs and voluntary organisations. [...] We see it as core and fundamental to our ability to win business. There does not need to be a contractual obligation; the self-reinforcing reality is that, unless we harness the capabilities of the voluntary sector and SMEs, we will struggle to compete with those who do.[271]

233.  This view was supported by Sodexo Justice Services who said the voluntary sector enhanced the services that prime contractors could provide.[272] G4S additionally explained how their funding model for the DWP Work Programme showed commitment to the voluntary sector:

We are flowing 85% of our government funding directly to our supply chain partners, which is more than any other organisation delivering Work Programme contracts. In addition, we gave smaller delivery partners the option of receiving more funding up-front to reduce the possibility of cash-flow problems arising from the 'payment by results' model.[273]

They told us that genuine partnerships needed to be encouraged, for example through joint ventures, payment by results or outcome based contracts. In addition, prime contractors should be given incentives to strengthen partnerships with the public and voluntary sectors. G4S currently subcontracted service delivery to organisations that were best placed to deliver those services locally. This combined financial strength, international experience and supply chain management with the local knowledge and expertise of delivery partners.[274]

234.  We asked the prime providers how they sub-contracted to SMEs and the voluntary sector to which Sodexo responded:

If you are looking at someone who is providing a specific service, then good business practice would suggest that you look for back-to-back contracts because the organisation has to take responsibility for what it is delivering. [However it] is very clear to us that you cannot work [that way] with the voluntary sector [...] the prime is that we retain the risk and not the voluntary sector organisation.[275]

235.  However, Clinks previously reported that some voluntary organisations had been used as 'bid candy' by large firms, whereby they were characterised in bids by potential prime contractors as 'delivery partners' after only very limited contact and superficial relationships, which subsequently did not convert into a paid role.[276] The NCVO told us it was confident that this was happening, but that it was quite hard to gather evidence. Anecdotally, a significant number of organisations told us that they thought this had happened. For example, organisations in parts of the DWP Work Programme were named as part of supply chains and then referred absolutely no work or they were not clear whether they were on the supply chain or not.[277]

236.  Clinks told us that the damage came when organisations were being asked to sign exclusivity arrangements with certain providers. There were all sorts of seemingly ill-informed reasons to do that, which meant tying the organisation to one provider that potentially would not win a contract, thus damaging their business opportunities in the future. Clinks considered this to be a more dangerous situation than where an organisation was in the bid, and if it did not win, the organisation got over it and moved on.[278] Clinks had previously reported that voluntary organisations felt that a clear and detailed code of conduct resembling the Department for Work and Pensions' Merlin Standards was required to regulate prime and subcontractor relationships within the criminal justice system.[279]

237.  The Secretary of State told us:

A good contractor [...] will need to subcontract to someone to deliver aspects of their service. So they will be as keen as we are to identify the service providers who can do what they want in the locality of the prison, or wherever it is they are entering into a contract. [...] But we are alert to the danger and we will have to keep an eye on it to make sure that there is a genuine incentive [...] for the small subcontractor as there is to the main contractor.[280]

In addition, Antonia Romeo, Director General - Transforming Justice, Ministry of Justice, told us that although the MoJ did not have a stand­alone code of conduct, it had clear policies for suppliers working with the Department.[281]

238.  We recommend that the Ministry of Justice assesses how its policies for suppliers compare to the Department for Work and Pensions' Merlin Standards and considers whether it too should regulate the prime to sub-contractor relationship.

239.  We recommend that the Department considers how it can use prime contracts to incentivise and increase the involvement of small and medium sized enterprises.


149   HM Treasury, Spending Review 2010, p 55 Back

150   Institute for Government, Transformation in the Ministry of Justice: 2011 interim evaluation report, June 2011, p 11 Back

151   Ibid. p 31 Back

152   Ev 131 Back

153   Ministry of Justice, Annual Report and Accounts 2010-11, p 5 Back

154   Ev 132 Back

155   National Audit Office, Comparing International Criminal Justice Systems, March 2012, Paras 3.4-3.6 Back

156   "MoJ most efficient department according to government data", Civil Service World, 2 November 2011 Back

157   Ev 129 Back

158   Ev 107 Back

159   IbidBack

160   National Audit Office, Financial Management Report 2011, HC 1591, Paras 2.13-2.14 Back

161   Ibid. Summary, Para 10 Back

162   Ev 107 Back

163   Ev 109 Back

164   Q 394 Back

165   Ev 136 Back

166   Ev 160 Back

167   Ibid. Back

168   Ev 131 Back

169   Ev 160 Back

170   Institute for Government, Transformation in the Ministry of Justice: 2011 interim evaluation report, June 2011, p 27 Back

171   Ev 169 Back

172   Ev 166 Back

173   Public Administration Committee, Eleventh Report of Session 2010-12, Good Governance and Civil Service Reform: 'End of Term' report on Whitehall plans for structural reform, HC 901, p 9 Back

174   Ev 118, 121, and 122 Back

175   Ev 159 Back

176   Cabinet Office, Ministry of Justice 2012 Capability Action Plan, p 13 Back

177   "£2bn prisons sell-off opens door to mass privatisation", The Times, 16 January 2012 Back

178   Qq 116-117 Back

179   Q 416 Back

180   Cabinet Office, Ministry of Justice 2012 Capability Action Plan, p 11 Back

181   Ev 137-8 Back

182   Ev 135 Back

183   Ibid. Back

184   Q 405 Back

185   Q 165 Back

186   Q 166 Back

187   Ev 135 Back

188   "Kenneth Clarke pledges to cut daily prison population", The Guardian, 20 October 2010 Back

189   Prison population statistics, Standard Note: SN/SG/4334, House of Commons Library, May 2012 Back

190   Ev 135 Back

191   Justice Committee, First Report of Session 2009-10, Cutting crime: the case for justice reinvestment, HC 94, Para 97  Back

192   Ibid. Back

193   Q 405 Back

194   Q 407 Back

195   Q 445 Back

196   Ministry of Justice, MoJ ICT Strategy, March 2011, p 6 Back

197   Ibid. Back

198   Ev 109 Back

199   Ev 125 Back

200   Ev 121 Back

201   Institute for Government, Transformation in the Ministry of Justice: 2010 interim evaluation report, June 2010, p 43 Back

202   Q 96 Back

203   Ibid. Back

204   Ev 120  Back

205   Q 350 Back

206   Committee of Public Accounts, Fortieth Report of Session 2008-09, The National Offender Management Information System, HC 510 Back

207   Ev 175 Back

208   Ev 174 Back

209   Q 511 Back

210   Q 68 Back

211   Public Administration Committee, Thirteenth Report of Session 2010-12, Change in Government: the agenda for leadership, HC 714, Q 172 Back

212   Committee of Public Accounts, Sixteenth Report of Session 2010-12, Ministry of Justice Financial Management, HC 574 Back

213   Committee of Public Accounts, Seventy Fifth Report of Session 2010-12, Ministry of Justice Financial Management, HC 1778, Qq 86-93 Back

214   Letter dated 12 July 2012, from Ursula Brennan, Permanent Secretary, Ministry of Justice, to Rt Hon Margaret Hodge MP, Chair, Committee of Public Accounts Back

215   Q 354 Back

216   Ev 180 Back

217   Qq 354-356 Back

218   Ev 179 Back

219   Ev 180 Back

220   Ev 132 Back

221   National Audit Office, Financial Management Report 2011, HC 1591, Paras 3.9-10 Back

222   Ev 133 Back

223   Ibid. Back

224   Ministry of Justice, Business Plan 2011-2015, May 2011, p 1 Back

225   Q66 Back

226   Q58 Back

227   Independent Monitoring Board, HMP Birmingham: The Annual Report of the Independent Monitoring Board to The Secretary of State for Justice - 2011, November 2011, p 21 Back

228   Ev 152 Back

229   Freedom of Information (Amendment) Bill 2010-12, http://services.parliament.uk/bills/2010-11/freedomofinformationamendment.html Back

230   Ministry of Justice, Memorandum to the Justice Select Committee - Post-Legislative Assessment of the Freedom of Information Act 2000, December 2011, Paras 89-91 Back

231   Justice Committee, First Report of Session 2012-13, Post-legislative scrutiny of the Freedom of Information Act 2000, HC 96, Paras 239-240 Back

232   Ev 118 Back

233   Ev 121-122 Back

234   Ev 126 Back

235   Q 461 Back

236   Public Administration Committee, Eleventh Report of Session 2010-12, Good Governance and Civil Service Reform: 'End of Term' report on Whitehall plans for structural reform, HC 901, p 9 Back

237   Q 214 Back

238   Ev 151 Back

239   "Prison governor locks out probation staff in G4S joint bid to privatise jails", The Guardian, 1 March 2012 Back

240   Independent Monitoring Board, HMP Birmingham: The Annual Report of the Independent Monitoring Board to The Secretary of State for Justice - 2011, November 2011, p 6 Back

241   Q 230 Back

242   HM Chief Inspector of Prisons, Report on an announced inspection of HMP Birmingham: 9 - 13 January 2012, March 2012, p 5 Back

243   Q 214 Back

244   Q 263 Back

245   Ev 124 Back

246   Written evidence from the Citizens Advice Bureau (LSC 01 - The work of the Legal Services Commission, HC 649-i) [not printed or published] Back

247   Ev 169 Back

248   Ev 108 Back

249   Q 211 Back

250   Ev 155 Back

251   Ev 172 Back

252   Ev 173 Back

253   Ev 152 Back

254   Ev 125 Back

255   Ev 110 Back

256   "What does central government think it spends on the voluntary sector?", National Council for Voluntary Organisations (NCVO)., 13 May 2011, http://www.ncvo-vol.org.uk/networking-discussions/blogs/116/11/05/13/what-does-central-government-think-it-spends-voluntary-sec Back

257   Q 466 Back

258   Ev 128 Back

259   Ev 121 Back

260   Ev 122 Back

261   Ev 150 Back

262   Ev 172 Back

263   Q 463 Back

264   Clinks submission to the Labour Party Justice Policy Working Group, January 2012, http://www.clinks.org/assets/files/PDFs/Response%20Documents/Clinks%20response%20to%20Labour%20justice%20consultation.pdf Back

265   Clinks, Annual Review 2010-11, pp 4-5 Back

266   Q 369 Back

267   Panel on the Independence of the Voluntary Sector, Protecting Independence: The voluntary sector in 2012, January 2012, p 20 Back

268   Clinks submission to the Labour Party Justice Policy Working Group, January 2012, http://www.clinks.org/assets/files/PDFs/Response%20Documents/Clinks%20response%20to%20Labour%20justice%20consultation.pdf Back

269   Q 374 Back

270   Q 375 Back

271   Q 236 Back

272   Q 238 Back

273   Ev 161 Back

274   Ev 153 Back

275   Q 240 Back

276   Clinks submission to the Labour Party Justice Policy Working Group, January 2012, http://www.clinks.org/assets/files/PDFs/Response%20Documents/Clinks%20response%20to%20Labour%20justice%20consultation.pdf Back

277   Q 376 Back

278   Ibid. Back

279   Clinks submission to the Labour Party Justice Policy Working Group, January 2012, http://www.clinks.org/assets/files/PDFs/Response%20Documents/Clinks%20response%20to%20Labour%20justice%20consultation.pdf Back

280   Q 466 Back

281   IbidBack


 
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Prepared 18 August 2012