- January 9, 2013
Today sees the launch of the new Justice Secretary’s plans for a substantial expansion in the use of payment by results (PBR) for the management and rehabilitation of offenders. These have been eagerly awaited and much anticipated since the Ministry of Justice (MoJ) paused previous plans to pilot PBR in a number of areas in last November.
The plans are, as always promised, subject to consultation (though only for six weeks!) and much detail has still to emerge. But it is clear that the proposals will be radical and will have huge implications for both Probation Trusts and for third and private sector providers of rehabilitation services.
The plans deserve careful analysis once more detail emerges but my initial reaction – as when the plans were first trailed in November – is that there is risk in such a radical change. Some have welcomed the new Justice Secretary’s clear desire to “get on with it”, but there were good reasons for the pilot-based approach which the MoJ was previously taking. This was not so much because otherwise the government would be taking “a reckless gamble with public safety” as the Labour Party has already alleged, but because the evidence base for the effectiveness of intervention in reducing re-offending was, and remains, poor. Without better evidence (which the pilots aimed to capture), it may be very hard to persuade many providers – already bruised by their experience of the Work Programme – to take part.
There are also many major challenges ahead for Probation Trusts – who will need to radically reorganise, and possibly mutualise or form joint ventures so they can bid for contracts; and for the MoJ commissioning team – who need to decide how they measure success in reducing reoffending, and for example whether they use “binary” or more complex measures which take account of success in reducing the severity or frequency of offences.
It’s going to be an interesting few weeks and then many months in the Justice sector!
- November 28, 2012
On November 23rd the Cabinet Office launched two initiatives designed to stimulate the market in social impact bonds (SIBs) and similar payment by results (PBR) schemes: the Centre for Social Impact Bonds (an online resource for those considering how to do this stuff); and the Social Outcomes Fund – which may be of more interest to commissioners and others since it involves government putting up some money to stimulate the market in SIBs.
We played a small part in the development of the Social Outcomes Fund, since it was one of the recommendations made in the report we co-authored with the Cabinet Office (in a previous life) on the feasibility of applying SIBs/PBR to troubled families. The principle of a SIB is that interventions to solve a social problem are funded from future savings to the commissioner and others. One of our findings was that it is difficult to persuade those who benefit from a successful SIB or PBR scheme and are not the main commissioner to make a contribution.
This was also the experience of Essex County Council when trying to get contributions to its SIB aimed at keeping older children out of care or custody (the launch of which, along with another SIB aimed at homeless rough sleepers in London, was also announced at the same event)
So the purpose of the fund – as made clear by Ministers at the launch event – is to enable those wanting to set up a SIB to apply for the fund if they cannot get contributions direct from other bodies. The Cabinet Office also hope that the Fund will help grow the market for SIBs and similar schemes – which have been slower to take off than many hoped Other sources of funding are starting to emerge which have similar aims – such as the impending Results Fund being set up by Big Society Capital.
In our view (we could hardly say otherwise) the Social Outcomes Fund is undoubtedly a good thing. The developing debate is whether SIBs and similar schemes will ever get to the sort of scale where they can make a real difference to social outcomes and – by extension – start to really impact on the costs of social problems. The general view at the launch from all sides (investors, commissioners and policy makers) seemed to be that things have moved on a good deal over the past couple of years, but there is still a way to go.
- November 8, 2012
The procurement of public services from the private sector was back in the news today, with the publication of a report by the National Audit Office (NAO) into the selection of Circle Health to run Hinchingbrooke Hospital (or more accurately, hold a ten year operating franchise for Hinchingbrooke Health Care NHS Trust). I have to declare a personal interest here, since I live in Cambridgeshire and Hinchingbrooke is my local hospital.
The report lead to a brief item on the Today programme (you can hear it here at 1.12.05) between the seemingly ubiquitous Chair of the Public Accounts Committee, Margaret Hodge MP, and the co-founder of Circle health, Ali Parsa. To my surprise, on this occasion I found myself partly agreeing with both of them.
Mrs Hodge argued that the commissioners of services could not simply take it on trust that a provider could deliver the services for the price they had bid, even when that price requires unprecedented savings, on the basis that the risk of failure lies with the provider. The franchise is effectively a payment by results contract, since Circle will earn no money over the ten-year life of the franchise, unless the Trust achieves a surplus under its management.
But that it makes it more important, not less, that the risks of failure are fully assessed and commissioners take a realistic view of what can be achieved. Because if the costs of failure are high, the risk is also high that the provider will walk away from the contract if they cannot deliver it. Whatever the contract terms, a provider can walk away and is quite likely to do so if the costs of continuing (financial and reputational) outweigh the benefits.
This is not a new problem, but it is becoming ever more important as contracts get bigger, more complex and require more risk taking by providers. We have just written a more considered piece on this issue which you can read here.
But my sympathies lay with Mr Parsa when he argued that it was too early to judge that Circle will fail to deliver on the franchise agreement. The BBC’s opening to the story was that Circle have “failed to cut the deficit” (after six months!), and Mrs Hodge argued that although it was “early days” if they were not taking the “low hanging fruit” then there must be concerns about the viability of savings in the longer term”
But as Mr Parsa argued, this was a bit like judging whether Mo Farah would win the 10,000m after the first 1,000, and it may be that the low hanging fruit are higher up the tree than anyone thought. It is true that the contract is behind schedule in financial terms, but most providers will tell you that the early months of a contract are often the worst, when they have to cope both with the transition to the new contract and with conditions on the ground that do not always reflect what they thought was the case – however good their due diligence.
The NAO could of course reasonably argue that their report is about how risks are assessed in awarding franchises and contracts of this kind, not about whether the contract will ultimately succeed – indeed they conclude that “we have concerns about the winning bid for the franchise because most of the projected savings occur in the later years of the contract [my italics], and about how the risks associated with this were taken into account in the contract award decision.”
But Mrs Hodge seemed to be making a broader judgment on my radio this morning, as are the media, and I thought Mr Parsa was right to argue that, to mis-quote Zhou Enlai, it was “too early to say”.
However we are not as a nation noted for our patience in judging whether a new policy or project is working, as any politician or policy maker will tell you.