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.

Garry Knight via Creative Commons
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Why Barack Obama was right to release Chelsea Manning

A Presidential act of mercy is good for Manning, but also for the US.

In early 2010, a young US military intelligence analyst on an army base near Baghdad slipped a Lady Gaga CD into a computer and sang along to the music. In fact, the soldier's apparently upbeat mood hid two facts. 

First, the soldier later known as Chelsea Manning was completely alienated from army culture, and the callous way she believed it treated civilians in Iraq. And second, she was quietly erasing the music on her CDs and replacing it with files holding explosive military data, which she would release to the world via Wikileaks. 

To some, Manning is a free speech hero. To others, she is a traitor. President Barack Obama’s decision to commute her 35-year sentence before leaving office has been blasted as “outrageous” by leading Republican Paul Ryan. Other Republican critics argue Obama is rewarding an act that endangered the lives of soldiers and intelligence operatives while giving ammunition to Russia. 

They have a point. Liberals banging the drum against Russia’s leak offensive during the US election cannot simultaneously argue leaks are inherently good. 

But even if you think Manning was deeply misguided in her use of Lady Gaga CDs, there are strong reasons why we should celebrate her release. 

1. She was not judged on the public interest

Manning was motivated by what she believed to be human rights abuses in Iraq, but her public interest defence has never been tested. 

The leaks were undoubtedly of public interest. As Manning said in the podcast she recorded with Amnesty International: “When we made mistakes, planning operations, innocent people died.” 

Thanks to Manning’s leak, we also know about the Vatican hiding sex abuse scandals in Ireland, plus the UK promising to protect US interests during the Chilcot Inquiry. 

In countries such as Germany, Canada and Denmark, whistle blowers in sensitive areas can use a public interest defence. In the US, however, such a defence does not exist – meaning it is impossible for Manning to legally argue her actions were in the public good. 

2. She was deemed worse than rapists and murderers

Her sentence was out of proportion to her crime. Compare her 35-year sentence to that received by William Millay, a young police officer, also in 2013. Caught in the act of trying to sell classified documents to someone he believed was a Russian intelligence officer, he was given 16 years

According to Amnesty International: “Manning’s sentence was much longer than other members of the military convicted of charges such as murder, rape and war crimes, as well as any others who were convicted of leaking classified materials to the public.”

3. Her time in jail was particularly miserable 

Manning’s conditions in jail do nothing to dispel the idea she has been treated extraordinarily harshly. When initially placed in solitary confinement, she needed permission to do anything in her cell, even walking around to exercise. 

When she requested treatment for her gender dysphoria, the military prison’s initial response was a blanket refusal – despite the fact many civilian prisons accept the idea that trans inmates are entitled to hormones. Manning has attempted suicide several times. She finally received permission to receive gender transition surgery in 2016 after a hunger strike

4. Julian Assange can stop acting like a martyr

Internationally, Manning’s continued incarceration was likely to do more harm than good. She has said she is sorry “for hurting the US”. Her worldwide following has turned her into an icon of US hypocrisy on free speech.

Then there's the fact Wikileaks said its founder Julian Assange would agree to be extradited to the US if Manning was released. Now that Manning is months away from freedom, his excuses for staying in the Equadorian London Embassy to avoid Swedish rape allegations are somewhat feebler.  

As for the President - under whose watch Manning was prosecuted - he may be leaving his office with his legacy in peril, but with one stroke of his pen, he has changed a life. Manning, now 29, could have expected to leave prison in her late 50s. Instead, she'll be free before her 30th birthday. And perhaps the Equadorian ambassador will finally get his room back. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.