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

4  Achieving "better for less"

The Ministry's long-term policies

240.  In the Annual Report and Accounts 2010-11, Kenneth Clarke MP, Secretary of State, explained the challenges faced by the Department:

Keeping the public safe, ensuring that those who break the law face the consequences and providing swift, cost-effective access to justice are fundamental responsibilities of the state towards its citizens. Yet for too long the system has not been working as well as it should. Our prisons are places of enforced idleness rather than proper punishment, and their dreadful reoffending rates blight the lives of new victims every day. Meanwhile, ordinary citizens turning to the courts sometimes find themselves part of a bureaucratic nightmare, not the beneficiaries of a public service. Addressing these problems is an urgent priority. That's why the past year has seen the first steps in one of the biggest shake-ups of the justice system in a generation.[282]

He set out the MoJ's long term programme of change and in the first area of reform - punishment and rehabilitation - he highlighted: a full working week in prisons; greater rehabilitation in prisons and greater use of treatment requirements in community sentences; and a fundamental shift in rehabilitation, to paying by results to deliver better outcomes for the public at the same, or less, cost. In the second area - the civil justice system - the aim was to deliver a system that was affordable and promoted the early resolution of disputes. This was to be achieved by seeking to streamline civil procedure, improve the family justice system and to restore balance to the operation of 'no-win, no fee' agreements; reforming the scope of Legal Aid; and promoting mediation through extra funding.[283]

241.  The MoJ told us it was largely a demand led organisation and, as such, made its savings plans based on assumptions and forecasts for workload.[284] Sir Suma Chakrabarti, the then Permanent Secretary, told us that he had three objectives which came together under the "better for less" umbrella. First was to reduce demand on the system, through mediation, reducing reoffending and flattening the prison population. He said these were being approached through policy changes, but it also involved working better with other Government departments. Second was to reduce cost, which was helped by reducing demand, but also involved a better understanding of the drivers of costs, which we have considered above. Third was to be more efficient, which was pursued in part through the restructuring of management tiers and through shared services.[285]

242.  The MoJ also explained that the major policy changes being taken forward—legal aid reform, sentencing reform, and the rehabilitation revolution—involved transformational change and alternative delivery mechanisms such as payment by results. These reforms were informed by analytical and financial modelling to ensure the impacts, costs and benefits of the changes were fully understood, including their impacts on customers. The estimated effects, models and assumptions were set out in Impact Assessments, which were signed off by the Department's Chief Economist and ministers, and were published to ensure proper public and Parliamentary scrutiny.

243.  The Institute for Government reported in 2011 that most of its interviewees agreed that 'better' was still an important part of the Transforming Justice programme. This held true across all of the major policy plans with the exception of reducing legal aid, which was seen by some interviewees as being 'less for less'.[286]

244.  In an attempt to stabilise the prison population, the MoJ had planned to introduce early guilty plea reforms, which it hoped would reduce demand for prison places. The decision not to proceed with this policy meant the Department had to revise its original savings plans. The MoJ told us it continued to monitor the delivery of its savings plans through continuous review of the Transforming Justice programme to ensure that they were on track and to assess how they were being affected by external factors.

245.  As many of the costs associated with the Ministry of Justice are driven by demand for its services, at times when expenditure has to be reduced it is sensible that attempts are made to reduce demand. However, this should be balanced by other steps the Department can take to reduce spending, such as reducing costs incurred through other drivers and working in more efficient ways.

246.  Earlier in this Report we discussed the quality of the Department's Impact Assessments. We recommend that the Department further improves its analytical function so that any future policy proposals are supported by high quality Impact Assessments that enable the fullest public scrutiny. We recommend that the Impact Assessment contains a statement of how the policy proposal fits with the label "better for less". We reiterate that in the longer term, the Department should consider how best it can work with other departments so that Impact Assessments take into account the wider social and economic costs of a policy proposal.

Payment by results

247.  In its 2010 Green Paper, Breaking the Cycle: Effective Punishment, Rehabilitation and Sentencing of Offenders, the MoJ stated that it would be introducing payment by results for the rehabilitation of offenders: a development it described as "a radical and decentralising reform which will deliver a fundamental shift in the way rehabilitation is delivered".[287] The previous Government launched a pilot for payment by results with the Peterborough Social Impact Bond for the rehabilitation of offenders who had served custodial sentences of less than 12 months, and the coalition Government committed to delivering a further six pilots. The Department told us it would provide an opportunity for the market to put forward additional ideas for payment by results projects,[288] and the National Council for Voluntary Organisations (NCVO) claimed the MoJ wants all contracts to be payment by results in some manner by 2015.[289]

248.  The Prison Reform Trust outlined its concern that the current payment by results model may not offer the best value for the tax payer. It argued that: the costs involved in complicated contractual arrangements; the use of prime contractors that would top slice funding; and the costs involved in developing and monitoring pilot projects would all divert money from service delivery. It highlighted justice reinvestment models as offering: a more effective use of resources; better opportunities for a mixed economy; and a more sustainable way of reducing reoffending.[290]

249.  However, G4S told us:

We [...] support the Government's commitment to payment by results as we believe the default setting for any contract should be to link payment for public services to outcomes. It is clear there are particular services where an outcomes/payment by results approach can be most easily adopted as clear and measurable outcomes can be established (for example in welfare to work, benefit fraud reduction or lower reoffending).[291]

250.  The NCVO has examined how payment by results has developed across Government. In terms of the MoJ, they said that the current payment by results pilots assumed results would be achieved to fit in with a predicted 'envelope of affordability'. They argued:

[The] MoJ are concerned [...] of the risks of unintentionally increasing their spend: that they will be paying more to providers for achieving results which keep people out of prison; but that those (judges and magistrates) who also influence the numbers of people entering prison will fill any gaps by sentencing more individuals as places become available. The MoJ will then be spending more—the very opposite of their aim".[292]

251.  The Howard League told us it was sceptical about the benefits of payment by results. It said "payment by results threatens to be an example of a system based on poorly conceived outcomes, and therefore one which will waste rather than save public money". It also highlighted a number of specific concerns:

  • Complexity of application produced inefficiency - payment by results encouraged a 'one size fits all' approach which prioritised the individuals that generated the highest income, and disregarded those whose problems did not fit within the mould.
  • This led to cherry-picking - where providers focused on those that would most easily meet their targets, leaving the people most in need without support.
  • Payment by results is not based on meaningful outcomes - a reduction in raw reconviction rates before statistical modelling was just one outcome, but interim outcomes such as a reduction in severity or frequency of offending were just as valid, but did not constitute a 'result'.
  • No record of success - the payment by results model had not been adequately tested in the criminal justice sector, yet the MoJ was committed to using it as a model for delivering many of its services at a lower cost. [293]

The Prison Reform Trust was concerned that payment by results was seen as a holy grail, which they suspected it was unlikely to be. Whilst payment by results could be a method that led to the better delivery of services and a more effective system, the Trust found it unnerving that the UK was seen as the world leader.[294]

252.  Phil Wheatley, former Chief Executive of NOMS, explained he was worried that the payment by results approach assumed an outcome could be grafted onto aspects of the criminal justice system. He referred to criminological thinking that suggested if the focus was on the whole offender experience—both in prison and probation—the system would work better. He also warned that there was a danger to payment by results that led people to think bits of treatment could be bought for offenders, rather than working to integrate all rehabilitation aspects together.[295] In addition, he said it was important that the payment by results models were designed so that they could not be gamed in a way that the ideal population of people could be selected so that it looked as though results were being achieved.[296]

253.  Clinks considered that the danger of providers cherry-picking depended on the design of payment by results contracts, and their incentive structures. They said that payment by results had potential but it needed a staged process to be successful both in terms of developing the market and the models. It was also essential not to create other perverse behaviours that led to groups of people falling out of scope of a contract. For Clinks, the binary model of offending/reoffending in particular presented a number of issues as capturing reoffending data was slightly different from whether someone had reoffended. It was not a foolproof method as it depended on who was unfortunate enough to be caught again. Additionally, there were difficulties about: deciding who provided the intervention that worked; who should get the payment; and at what level the payment should be.[297]

254.  The NCVO felt there was a difficulty in defining and attributing outcomes which became more complicated when dealing with people with chaotic and difficult lives, who had interactions with a number of different organisations. Deciding who got the credit for quite an unclear outcome at the end was incredibly complicated when using a very straightforward yes/no kind of model.[298]

255.  However, Tony Leech, Managing Director, Sodexo Justice Services, argued that the binary model was a good starting point as it was a clear simple model that showed if a certain level of effort, was expended, a certain group would have a good chance of not reoffending. He described the cohort as an inverted triangle where, as you moved into the more difficult cases that required far more assistance, it became more expensive, and the challenge became far more complex.[299] For the complex cases, prime providers would need to call on other organisations to use their skills to a greater degree.[300]

256.  G4S considered that the best designed payment by results systems would address the issue of creaming and parking, and would allow the segmentation of different cohorts of offender, according to how difficult changing their behaviour was likely to be. They also argued that at the extreme edges of the overall offender cohort payment by results would not be suitable. This was because the extremely intractable problems and issues of these offenders would make it a risk to put them into a payment by results system.[301] G4S also told us that there could be occasions when two or more agencies played a part in achieving an outcome, such as through helping with employment and addressing substance misuse. Here it was important to design carefully how different systems integrated with each other.

257.  The Justice Secretary told us it was true that all kinds of desirable outcomes could come out of attempting to intervene, but he thought the contracting model that would work best in payment by results was one that focused on the primary objective. The objective that the MoJ particularly wished to reward was a reduction in reoffending where someone ceased to offend. Whilst it was desirable that if the next time they entered the criminal justice system they had not committed as many offences as the time before, or the nature of the offences had become less severe, or there had been some improvement in their behaviour, they were still committing crime. He was convinced that value for money would only be achieved if the focus was on what really mattered—increasing the proportion who stopped committing more crimes.[302]

258.  We raised with the Department the point that, in terms of the design of payment by results programmes on probation, Community Payback was to be let on a pan-regional level whilst the Prison Service performed at a national level. We put it to the MoJ that if they were to restructure within NOMS so that payment by results contracts could be performed over a region, both for prisons and probation, this would achieve greater results, but that due to current structures these ideas were not considered. Sir Suma responded that the work NOMS was doing on payment by results was as part of a cross­departmental team, and that both procurement and policy staff were involved in designing the contracts.[303]

259.  The NCVO was impressed with the way that the MoJ had engaged with the voluntary sector at the consultation stage for payment by results. In particular it was impressed by the time and resource that the Department had put into its pilots, which was in stark contrast to other Departments. They noted that the DWP Work Programme could have benefited from following the MoJ's example on piloting and gathering evidence.[304]

260.  We recognise the potential benefits of payment by results, but are concerned that this potential may not be realised because of structural problems in NOMS and the MoJ which we have identified earlier in this Report. We will continue to monitor the progress of the Department's payment by results programme and call on the Department to report to us on the steps they are taking to mitigate the risks involved with this process, such as the risk that contractors will 'cherry pick' the individuals they chose to work with in order to maximise profit.

The next stage of Transforming Justice

261.  In Chapter 2 of this Report we looked at the changes the Ministry of Justice had already made to its overarching and internal structures, and how it co-operated and collaborated with others in the wider justice system. Sir Suma told us that the first phase of Transforming Justice was "very much about trying to sort our own house out, working better within what we control within the MoJ".[305] As part of this, in the last nine months to a year, the MoJ had tried to get its NDPBs to embrace Transforming Justice in addition to the Ministry and the executive agencies.[306] The next phase was to be about how the MoJ could work better with other departments. As a consequence, the Transforming Justice programme had been extended from 2015 through to 2020, and Antonia Romeo, Director General - Transforming Justice, Ministry of Justice, had been entrusted with the programme's ongoing progress.[307]

262.  The Institute for Government's (IfG) 2010 report contrasted the radical approach the MoJ had taken to engage its own staff in the transformation process with the lack of engagement there was with other Government departments about Transforming Justice.[308] By 2011 they reported that MoJ staff felt there was more integrated working with other departments (Home Office, Health and Work and Pensions) but that this was still at an early stage and should be strengthened. It was also felt that further progress was needed to gain buy-in from other key stakeholders such as the judiciary, magistrates and the wider legal profession.[309]

263.  The MoJ argued that the Government was getting better at formulating policies and working across departments, and then dividing the costs between them, as with the troubled families agenda. However, that had required extensive negotiation about financing, and generally there were significant improvements to be made. The next stage of Transforming Justice was going to have to involve much more cross­boundary working.[310]

264.  Sir Suma told us that the MoJ would have to work across boundaries much better than it had previously if the justice system was to be made more effective. However, the system was very siloed and there were cultural issues to overcome. He noted that if various bits of the justice system were asked who was responsible for problems in the system, they would all blame each other.[311] Through collaboration he thought that this could be overcome. He gave the example of the Troubled Families agenda, which involved collaborating with local authorities on family justice. This showed that the MoJ was moving in the right direction, albeit at an early stage. He argued that incentives were required for people to feel that if they left their silo then the MoJ's leaders would push and promote them over those who were blocking change, and as the Permanent Secretary it was important for him to give that signal out. [312]

265.  Antonia Romeo told us about two other areas where the MoJ had made progress in joining up the Department's work:

We have a number of pilots on payment by results with other departments, two of which will be kicking off in the summer with DWP, which builds Reducing Reoffending outcomes into the Work Programme, and eight drug recovery pilots that we have recently started with the Department of Health. So we are making progress, although there is certainly a long way to go. As Sir Suma said, we are keen that in the next phase of Transforming Justice we will be joining up across Whitehall, not only bilaterally but Whitehall getting together and also, critically, locally, to work out how we can jointly work to achieve outcomes better.[313]

266.  We asked stakeholders in the wider justice system if they were aware of the Transforming Justice programme, to which the Law Society said it was, but did not think much had been done to sell it to outside stakeholders. It argued that solicitors and the legal profession were key actors in the justice system, providing a lot of the services without which the system could not work, so would welcome an opportunity to provide input.[314] Liberata told us that the MoJ could benefit from drawing more on provider firms' understanding of the MoJ's core businesses as a rich source of information and advice to assist the Department with its procurement activity.[315]

267.  Peter Handcock, Chief Executive, HMCTS, told us that as a whole Transforming Justice involved a quite wide portfolio of projects, and the purpose of the Transforming Justice system was to make a coherent agenda of that. He argued that the overall agenda was not of interest to all stakeholders across the whole spectrum of projects, so people were brought in to engage on the things that interested them rather than the whole Transforming Justice portfolio.[316]

268.  Antonia Romeo told us that as the MoJ made progress on with Transforming Justice it had to see how it could create an environment which brought small scale organisations together in partnership. She gave the examples that at HMP Doncaster, the contractor, Serco, was working with the charities Turning Point and Catch22 to deliver outcomes, whilst at HMP Brixton prison the St Giles Trust worked with other groups round the table to focus on drugs or unemployment. In addition she stated:

We have to think about how the role of the Government or the state could increasingly be to facilitate these partnerships happening, keeping the bits that the Government should rightly keep to themselves in the public sector, and also critically share best practice so that we do not have problems with local implementation.[317]

269.  One of the pre-requisites for justice to be transformed successfully is for all involved in the delivery of services to work more effectively with other partners. The Department has made good progress in breaking down silos within its own organisation. We are not convinced, however, that sufficient energy or attention has yet been given to engaging stakeholders in other Government departments, other parts of the public sector beyond Whitehall, the voluntary sector, and the private sector. We applaud the work done on Transforming Justice to date; the Department now needs to tell us how it will build on this work to make the justice system truly joined up.

270.  Another aspect of the Transforming Justice programme is that it implies in the future the MoJ will be more streamlined, and be culturally different in order to approach policies such as the "rehabilitation revolution". The Prison Reform Trust told us it saw the MoJ as being an organisation comparatively light at the centre but highly skilled and experienced. It needed to: develop policy and the context for legislation; publish original research; commission independent evaluations; disseminate good practice; monitor performance; and ensure regulatory mechanisms are in place; and required excellent commissioning and outsourcing capacity.[318] Additionally, the IfG told us that the MoJ was becoming more hands-off and was questioning whether functions required a nationally designed process or could be taken on by others who could design their own process and fit that around individuals.[319]

271.  Sir Suma explained that particularly since the election the culture of the MoJ had changed, and there was a sense that the MoJ was "less, shall we say, Stalinist, central control, and much more about front-line professionals exercising their experience, being able to make judgments for themselves, and about being much more open to non­state providers than we ever were before".[320] The Ministry of Justice 2012 Capability Action Plan set out the key challenges for the Department. In particular it stated:

The Ministry needs to improve its capability to deliver the reform programme through building capacity in the key specialists skills areas that are needed to support change and to improve the performance of some key operational systems.[321]

272.  We have commented on the lack of financial management capability earlier in this Report, and we have been told that the MoJ lacked capability in other areas throughout our inquiry. The Prison Reform Trust told us it was unconvinced that the current arrangements for commissioning and contracting were adequately developed.[322] The Law Society was also unconvinced that the relevant procedures or expertise were in place to achieve value for money through commissioning and contracting.[323]

273.  In a memorandum to the Public Administration Committee, the Permanent Secretary said the MoJ was committed to acquiring and retaining the expertise necessary to carry out its reforms, and as part of the Transforming Justice programme it was 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 five to ten years.[324]

274.  Sir Suma argued that because what the Department was trying to do in the near future was beyond anything that anyone else in Government had tried to achieve it would require a different set of skills. He stated:

I was hoping we were going to talk about some of the skills for the future. The more we move into this area of payment by results, contracting out, there is a whole set of issues on commercial and contract management skills in the Department that we need to make a big push on. That is what our own capability review is telling us. [...] That is the area we have to make a major push on. I do not only mean hiring a lot of people in procurement. [...] It is much more about getting staff more broadly throughout the organisation thinking in commercial terms in a way that they have not grown up thinking. [...] It is quite important that we shift our thinking. That has begun to happen because of PbR. If you look at some of the people who have been working on PbR, they have learned, frankly, on the job, as they have tried to make the market. We are going to have to up the pace on that significantly in the next five or six years as part of the transformation. I agree with that.[325]

However, the Justice Secretary cautioned about the current risk of a lack of commissioning skills:

Developing the capacity of people to commission things is quite important. It is a problem we are aware of and we are focusing on a bit. [...] We are conscious of the dangers of trying to take people into this area when they have not done it before and all kinds of things can go wrong, including entering into contracts that are extremely profitable for your contractors or producing perverse incentives in how they deliver things. We are going to have to work at how we develop the capacity.[326]

Additionally, Antonia Romeo set out how this risk was to be addressed:

What we are trying to do in the next phase of Transforming Justice is to look at the skills and capabilities we will need to get to where we will need to be in 10 years' time. We are already in a major programme of competition. [...] Understanding that, over time, we are going to need to get even better at this, we have kicked off a capability steering group to look at the sort of capabilities, in particular focusing on commissioning capabilities—so contract management as well as contract writing and negotiation and so on, financial management and procurement—in order to make sure that as we move even further into this we have the capability in the Department to do it.[327]

275.  In the foreword to the 2012 Capability Action Plan, Sir Suma stated that the MoJ would publish a People Plan by May 2012 to drive improvements in its ability to work collaboratively and to develop its staff capacity to deliver, particularly through developing their commercial acumen.

276.  Another key challenge set out in the 2012 Capability Action Plan was that the MoJ had to focus and communicate more on the "better" in "better for less". It stated that the next stage of Transforming Justice needed a strong emphasis on defining and communicating the strategy for improving outcomes in the medium to longer term.[328]

277.  We asked the IfG, when they conducted their interviews for their reports, what MoJ staff thought "better" to be. They said amongst senior managers there was a sense of "better", but there were a lot of different versions of "better", depending on what you discussed. For some reducing recidivism would be a great outcome, but a lot of the things that were mentioned were about efficiency savings. They stated that there was very little measurable about what "better" would actually mean and look like. On the other hand, "less" was clearly the financial targets that needed to be delivered.[329] Additionally, in the IfG's 2011 report they concluded:

In the face of unprecedented fiscal austerity, TJ could lose sight of its ambition to make the justice system better—its original raison d'être—and become simply a programme of cuts [...]. The focus on 'better' would be aided by the development of clear measurements of what a better justice system looks like, so that progress can be more easily tracked.[330]

278.  The Prison Reform Trust told us that as a headline, "better for less" could not be argued with and was attractive. However, they were disconcerted that there was very little reference to "Justice Reinvestment" within Transforming Justice, which it argued could be at the heart of the programme.[331]

279.  We asked the Justice Secretary what he thought a successfully transformed justice system would look like, to which he answered:

I hope it will be more public-service oriented. Most public services are the same. They used to be run for the benefit of the people who worked in them and were very dominated by the processes to which they were accustomed. That, 40 years ago, was where most public service was in this country. I am not sure that the justice system has moved quite as quickly as some others.

The idea is that the whole thing is at the service of the public, be it the public you are protecting in the criminal law, the public whose disputes you are helping to resolve in an expeditious and reasonably affordable way or the public whose family disputes you are sorting out as quickly, properly and sensitively as you can. If you applied that first principle, "Let us look at the public interest and the consumer, first of all, and then decide how we run it," there is a lot more reform to be done. It is inevitable, but courts tend to be run for lawyers, or they used to be; prisons tend to be run for prison officers, or they used to be; and the local government services and so on rather similarly. Reform, therefore, can do all kinds of things: save a lot of money, speed things up and get more tidy in management accountability and political accountability. Also, it ought to be asked, all the time, "What is it we are trying to deliver for the public and the public good?" That is the principal reason why we are reforming practically everything in the Department at the same time as we are reducing the cost and saving public money, but that is the general direction I would like us to go in.

In addition, Sir Suma said that at the end of Transforming Justice it was fundamental, that there was the "better" bit, so that people who did come into the justice system, for whatever reason, had a better service than they did currently.[332]

280.  Achieving "better for less" is a challenge faced by all departments. The Transforming Justice Programme has made some progress on making the Department better, in terms of being more effective and efficient, but we have indicated in this Report that further structural change and integration will be needed to carry this forward. We recommend that the Ministry sets out how it will measure a "better for less" justice system from the perspective of clients or users and the wider public.

282   Ministry of Justice, Annual Report and Accounts 2010-11, p 3 Back

283   IbidBack

284   Ev 132 Back

285   Q 437 Back

286   Institute for Government, Transformation in the Ministry of Justice: 2011 interim evaluation report, June 2011, p 17 Back

287   Ministry of Justice, Breaking the Cycle: Effective Punishment, Rehabilitation and Sentencing of Offenders, December 2010 Back

288   Ev 133 Back

289   "Payment by results (Public services)", National Council of Voluntary Organisations, Back

290   Ev 121 Back

291   Ev 151 Back

292   "Payment by results (Public services)", National Council of Voluntary Organisations, Back

293   Ev 127 Back

294   Q 64 Back

295   Qq 110-111 Back

296   Q 112 Back

297   Qq 381-2 Back

298   Q 383 Back

299   Q 246 Back

300   Q 247 Back

301   Qq 247-248 Back

302   Q 474 Back

303   Q 187 Back

304   Q 371 Back

305   Q 437 Back

306   Q 440 Back

307   Q 437 Back

308   Institute for Government, Transformation in the Ministry of Justice: 2010 interim evaluation report, June 2010, pp 31-2 Back

309   Institute for Government, Transformation in the Ministry of Justice: 2011 interim evaluation report, June 2011, p 21 Back

310   Q 179 Back

311   Q 446 Back

312   Ibid. Back

313   Ibid. Back

314   Qq 36-37 Back

315   Ev 149 Back

316   Q 338 Back

317   Q 199 Back

318   Ev 118 Back

319   Q 28 Back

320   Q 127 Back

321   Cabinet Office, Ministry of Justice 2012 Capability Action Plan, Page 8 Back

322   Ev 121 Back

323   Ev 126 Back

324   Good Governance and Civil Service Reform: 'End of Term' report on Whitehall plans for structural reform, Public Administration Committee, HC901 Back

325   Q 153 Back

326   Qq 460-461 Back

327   Q 462 Back

328   Cabinet Office, Ministry of Justice 2012 Capability Action Plan, p 8 Back

329   Qq 25-28 Back

330   Institute for Government, Transformation in the Ministry of Justice: 2011 interim evaluation report, June 2011, p 31 Back

331   Q 36 Back

332   Q 437 Back

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Prepared 18 August 2012