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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“I hate censorship”: Larry King on his journey from prime time TV to Russia Today

The talk show host opens up about interview technique, his unique method of tweeting, and his experience of working with the state-backed channel, RT.

The first celebrity interview Larry King did was by chance, in a Miami Beach restaurant. He was a 26-year-old local radio presenter, and had set up his mid-morning show to broadcast from the popular Pumpernik's deli. In walked the singer Bobby Darin, famous for his hit version of “Mack the Knifereleased that year, 1959, and gave the young journalist his first showbiz interview. King has been asking questions ever since.

The 83-year-old US talk show host and household name estimates that he has done around 60,000 interviews in his time. And he’s still going. After 58 years of presenting radio and TV programmes – he hosted the nightly interview show Larry King Live on CNN for 25 years – he now hosts Larry King Now and Politicking with Larry King on RT America (the US output of the channel originally known as Russia Today).

That’s why he has been in London – to publicise his two shows as part of the Russian state-funded network’s tenth anniversary publicity drive.

“I haven’t been here in a long time, and I’m sorry I haven’t been here more because it’s a terrific city,” he says, when I sit down with him at the Mayfair Hotel restaurant. It echoes with light jazz and pristine corporate chatter.

Like a society tortoise, cheeky but reflective, King sits low on a plush leather bench with his head hunched forward. His right hand is planted beside him as an anchor, and his left is reserved for banging the table and gesticulating. He wears stylish black thick-rimmed glasses, and the rest of his outfit is every bit the smart-casual elderly hack: jeans and a blazer, stripy tie clashing with the stripes on his shirt.

“The only thing – you cannot find a good cawffee. Maybe it’s the wadda?”

An almost stereotypical born-and-bred New Yorker’s response to being away from home – his Brooklyn roots brought even closer with his assertion that he loves the “Bridish sensa yumour”, in spite of our nasty water.

Known for his laidback, non-confrontational interview style and array of high-profile subjects – Donald Trump, Morrissey, Muammar Gaddafi, Oprah Winfrey, Robin Williams, Michelle Obama, Barbra Streisand, Marlon Brando, the Dalai Lama, Frank Sinatra and Vladimir Putin are just a few – King left Larry King Live in 2010.

It was the preening tabloid troublemaker Piers Morgan who replaced him on the prime time slot in January 2011. But Piers Morgan Tonight was a doomed venture, axed in March 2014 after plummeting ratings. King and Morgan’s relationship has been fraught, with the former calling his successor “oversold” and accusing him of making the show “all about him. He used the word ‘I’ a lot.”

In a characteristically classy response, Morgan tweeted: “I made my CNN show all about gun control & saving lives. You made yours about blowing smoke up celebrity backsides.”

He also called King an “old goat”.

King doesn’t want to discuss this spat, but warns against talk show hosts who make interviews about themselves.

“I don't use the word ‘I’, because I find, in interviewing, for my style, ‘I’ is irrelevant because the subject is not me. The subject is the guest. What I think is immaterial; my role is a conduit from the guest to the audience.”

Perhaps this detachment dispelled any qualms King may have had about hosting two shows on the often laughably biased Kremlin-backed propaganda channel. He doesn’t seem happy about some of his broadcaster’s activities though.

“I certainly vehemently disagree with the position they take on homosexuals – that's absurd to me,” he frowns. “ . . . If they say homosexuality is, like, whatever they say, all I know is, I've asked this question all my life . . . I’m heterosexual. I have no idea why. A homosexual can’t tell me why they’re attracted to people of the same sex, just as the heterosexual. You could tell me I like that skirt, I like high heels, but I don’t know why. I just know that it’s true. So I don’t understand why a state could tell people how to feel about other people.”

But he insists: “They [RT] have never censored me, or told me who to have as a guest, or not have as a guest. They distribute my show. I do the show for Ora TV [an internet network], and I have a wonderful working agreement with RT . . .

“I hate censorship of any kind, abhor it, so I would never approve of you telling me what I can say, or I telling you what you can say. And I've never been censored – in fact, my whole life – by anyone. I've been fortunate. I’ve never been told ‘don’t book this guest’, ‘don’t ask this question’, ‘don’t reveal this’. And it’s never happened to me with RT . . . If they do it, I disagree with it.

He adds: “State ruling against any individual thought is abhorrent to me. I don’t like dictatorships, I don’t like fascism, I don't like communism. I don't like ‘isms’.”

Perhaps King’s thirst for freedom is best expressed through his Twitter feed. His odd one-sentence proverbs about life’s banalities have become something of internet legend – ie articles have been written about them. Here are some examples:

“I like the smell of turpentine.”

“I've been having a hard time finding Nestlé's Crunch bars lately.”

“I don't know why, but I've never enjoyed drinking water.”

“I know about tonsils, but what is an adenoid?”

“The fear of a colonoscopy is unwarranted.”

“The rat is perfectly named.”

“Are there any babies being named Fred these days? #itsmy2cents”

“It seems to me women don't wear ankle bracelets anymore. #itsmy2cents”

“Where exactly is the Internet? #ItsMy2cents”

That final example makes the most sense considering King’s strange relationship with Twitter, and modern technology in general. He doesn’t type any of his tweets himself, preferring – when he has an idea he’d like to impart to his 2.62m followers – to pick up his chunky old black flip-phone, call his producer or assistant, and dictate his thoughts. Sometimes he dictates them directly to his wife. He proudly takes his phone out of his jacket pocket to show me.

“It's a relic, but it's my relic. I don't text, I don't like texting. I like talking . . . I use the internet to my advantage, in that I dictate tweets. But I don't read a lot of tweets. I don't know where to read ‘em! Because this phone doesn't get tweets . . . I just call a number, and the person who answers it sends them out. Why do I have to type them?”

He gestures to the three PRs (yes, three) sitting in on our interview, all of them on their smartphones. “Before I had a heart attack years ago, I used to smoke three packs of cigarettes a day. Cigarettes controlled me. When I woke up in the morning, before I put on glasses, before I got out of bed, I had to reach for that pack of cigarettes. It controlled me. Now, look at this,” he points at them as they sheepishly look up from their phones. “See that? I never want to be a victim again of anything.”

In spite of his one-way use of technology, King is plugged in to internet controversy. He nods when I bring up the recent story of Vanity Fair angering readers with a feature celebrating late-night talk show hosts illustrated with a photograph of ten suited hosts – all of them men.

“I don't know why [there are so few women presenters],” he says, but doesn’t shrug it off. He continues talking about the subject even after our interview is over and I’ve stood up to leave. “It’s also true about radio talk shows . . . If you turn on the radio in the morning, the man is the host. Why? I've never hired people, I don't run a station. I remember this story, it's true, but I don't know why. I've no idea. Why is the man the host of a morning radio show?”

He pauses and then barks: “Why on local TV are all the weathermen women? And they all wear tight dresses. Why is that? I want men weathermen. More men on the weather! Show me a picture of all the male weathermen on local TV.”

That would make a vintage Larry King tweet. He’d better dial it in sharpish.

Anoosh Chakelian is deputy web editor at the New Statesman.