The dangers of payment-by-results in probation

Grayling's reforms show the coalition hasn't learned from the failure of the Work Programme.

Today the Justice Secretary, Chris Grayling, set out the coalition’s latest payment-by-results (PBR) scheme. Originally developed as a way of contracting out back-to-work employment services, this public services version of ‘no win, no fee’ is going to be extended to the probation service in an attempt to bring down reoffending.

The idea is simple – services once delivered by the state are contracted out to private and voluntary sector providers, but a big chunk of these providers’ fees are only paid if they achieve certain outcomes. So in the Work Programme around 80 per cent of the fee is paid only once an unemployed person has been supported into a sustainable job. In the probation service, the measure of success will be reoffending rates. The state only shells out if private companies do what they promise. What could possibly go wrong?

The answer is, unfortunately, quite a lot, as the Work Programme has shown a couple of years into the original contracts. And none of the lessons it’s thrown up seem to have been taken on board.

First, PBR is essentially a way of the state contracting out risk and uncertainty. In order to come up with the right price tag, the state needs to be able to price that risk. The problem comes when public commissioners have no idea about levels of risk involved in what they’re commissioning – and when contractors themselves have no control over some of the biggest risks like the state of the economy in the Work Programme. This is one reason why Work Programme contractors are likely to find themselves in difficulties – the original contracts built in overly optimistic assumptions about the labour market. So the contracts are too stretching and if they are stuck to, the government in effect will be underpaying for services given the economic backdrop.

Does it really matter? Surely underpayment is no skin off the state’s nose. But this is far too simplistic. There’s too much at stake with unemployment – the Work Programme providers really are too big to fail, which some of them may do if they fail to meet outcomes set out in their contracts. That’s arguably even more true in the case of probation services, where public safety is at stake. This implicit guarantee at least partially erodes the point of PBR as a risk transfer mechanism. And it muddies accountability. If the economy’s doing worse than expected – which affects reoffending as well as unemployment – who’s responsible for contractors not meeting their outcomes?

Second is the impact of payment-by-results on the voluntary sector. These PBR contracts couldn’t be more distant from the notions of "big society" or devolution – the proposals for the probation scheme are for just a handful of contracts covering huge swathes of the country. Only large private companies are able to absorb the risks involved in going for a contract of this size, which is why it is the Sercos and A4Es of this world delivering the Work Programme rather than even the largest charities involved in welfare to work. The idea is that these big contractors subcontract to the voluntary sector. Yet the Work Programme contracts have been structured in such a way that private providers can cream off the ‘safe’ payment not linked to outcomes and pass on more – not less – risk to the small voluntary organisations with whom they subcontract. The result is that far from building up voluntary sector capacity, PBR risks squeezing it at the expense of big companies. No wonder the sector is outraged.

The third fundamental problem with PBR is that it discourages knowledge-sharing of what works – whether that’s getting people back into work, improving kids’ reading or reducing reoffending. Initial data on the Work Programme shows there is big variance in the performance of different companies. What are some doing that’s more effective than others? This is a question of huge public interest. Yet PBR means that companies – far from sharing best practice across the public sector – have a commercial interest in protecting their recipes for success. This is one example of where there is a real tension between the profit motive and public interest, and it needs to be managed.

None of this to suggest that there is anything inherently wrong with private sector delivery of public services. Of course the public sector could stand to gain from intelligently incorporating some learning from the private sector if it’s done in the right way. But it’s just as ridiculous to say the private sector is always better at delivering public services than it is to say it’s always worse.

Unfortunately, the state has a history of making some pretty bad deals with the private sector – from PFI deals gone wrong to the public-private venture capital funds that lost huge amounts of money in the 1990s and 2000s. All of these examples highlight the importance of getting the relationship - and, crucially, the contract that structures that relationship – between the public and private sector right. But unfortunately for those who adopt a ‘private sector good, public sector bad’ mantra, that’s probably trickier to do than delivering efficient services in the first place. It’s a great shame the coalition shows no indication of learning the lessons from the Work Programme – and it means there’s a real risk PBR ends up being the PFI story of the 2010s.

Justice Secretary Chris Grayling speaks at last year's Conservative conference in Birmingham. Photograph: Getty Images.

Sonia Sodha is head of policy and strategy at the Social Research Unit and a former senior policy adviser to Ed Miliband. She tweets @soniasodha.

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As it turns out, the Bake Off and the Labour party have a lot in common

And I'm not just talking about the fact they've both been left with a old, wrinkly narcissist.

I wonder if Tom Watson and Paul Hollywood are the same person? I have never seen them in the same room together – neither in the devil’s kitchen of Westminster, nor in the heavenly Great British Bake Off marquee. Now the Parliamentary Labour Party is being forced to shift to the ­political equivalent of Channel 4, and the Cake Meister is going with. As with the Labour Party under Jeremy Corbyn, so with Bake Off: the former presenters have departed, leaving behind the weird, judgemental, wrinkly old narcissist claiming the high ground of loyalty to the viewers – I mean members.

Is the analogy stretched, or capable of being still more elasticised? Dunno – but what I do know is that Bake Off is some weird-tasting addictive shit! I resisted watching it at all until this season, and my fears were justified. When I took the first yummy-scrummy bite, I was hooked even before the camera had slid across the manicured parkland and into that mad and misty realm where a couple of hours is a long time . . . in baking, as in contemporary British politics. It’s a given, I know, that Bake Off is a truer, deeper expression of contemporary Britain’s animating principle than party, parliament, army or even monarch. It is our inner Albion, reached by crossing the stormy sound of our own duodenums. Bake Off is truer to its idea of itself than any nation state – or mythical realm – could ever be, and so inspires a loyalty more compelling.

I have sensed this development from afar. My not actually watching the programme adds, counterintuitively, to the perspicacity of my analysis: I’m like a brilliant Kremlinologist, confined to the bowels of Bletchley Park, who nonetheless sifts the data so well that he knows when Khrushchev is constipated. Mmm, I love cake! So cried Marjorie Dawes in Little Britain when she was making a mockery of the “Fatfighters” – and it’s this mocking cry that resounds throughout contemporary Britain: mmm! We love cake! We love our televisual cake way more than real social justice, which, any way you slice it, remains a pie in the sky – and we love Bake Off’s mixing bowl of ethnicity far more than we do a melting pot – let alone true social mobility. Yes, Bake Off stands proxy for the Britain we’d like to be, but that we can’t be arsed to get off our arses and build, because we’re too busy watching people bake cakes on television.

It was Rab Butler, Churchill’s surprise choice as chancellor in the 1951 Tory government, who popularised the expression “the national cake” – and our new, immaterial national cake is a strange sort of wafer, allowing all of us who take part in Paul’s-and-Mary’s queered communion to experience this strange transubstantiation: the perfect sponge rising, as coal is once more subsidised and the railways renationalised.

Stupid, blind, improvident Tom Watson, buggering off like that – his battles with the fourth estate won’t avail him when it comes to the obscurity of Channel 4. You’ll find yourself sitting there alone in your trailer, Tom, neatly sculpting your facial hair, touching up your maquillage with food colouring – trying to recapture another era, when goatees and Britannia were cool, and Tony and Gordon divided the nation’s fate along with their polenta. Meanwhile, Mel and Sue – and, of course, Mary – will get on with the serious business of baking a patriotic sponge that can be evenly divided into 70 million pieces.

That Bake Off and the Labour Party should collapse at exactly the same time suggests either that the British oven is too cold or too hot, or that the recipe hasn’t been followed properly. Mary Berry has the charisma that occludes charisma: you look at her and think, “What’s the point of that?” But then, gradually, her quiet conviction in her competence starts to win you over – and her judgements hit home hard. Too dense, she’ll say of the offending comestible, her voice creaking like the pedal of the swing-bin that you’re about to dump your failed cake in.

Mary never needed Paul – hers is no more adversarial a presenting style than that of Mel and Sue. Mary looks towards a future in which there is far more direct and democratic cake-judging, a future in which “television personality” is shown up for the oxymoron it truly is. That she seems to be a furious narcissist (I wouldn’t be surprised if either she’s had a great deal of “work”, or she beds down in a wind tunnel every night, so swept are her features) isn’t quite as contradictory as you might imagine. Out there on the margins of British cookery for decades, baking cakes for the Flour Advisory Board (I kid you not), taking a principled stand on suet, while the entire world is heading in one direction, towards a globalised, neoliberal future of machine-made muffins – she must have had a powerful ­degree of self-belief to keep on believing in filo pastry for everyone.

So now, what will emerge from the oven? Conference has come and gone, and amateur bakers have banged their heads against the wall of the tent: a futile exercise, I’m sure you’ll agree. Will Jeremy – I’m sorry, Mary – still be able to produce a show-stopper? Will Mel and Sue and Angela and Hilary all come sneaking back, not so much shriven as proved, so that they, too, can rise again? And what about poor Tom – will he try to get a Labour Party cookery show of his own going, despite the terrible lack of that most important ingredient: members?

It’s so hard to know. It could be that The Great British Bake Off has simply reached its sell-by date and is no longer fit for consumption. Or it could be that Tom is the possessor of his alter ego’s greatest bête noire, one as fatal in politics as it is in ­bakery, to whit: a soggy bottom. 

Will Self is an author and journalist. His books include Umbrella, Shark, The Book of Dave and The Butt. He writes the Madness of Crowds and Real Meals columns for the New Statesman.