National Audit Office report on Transforming Rehabilitation: Progress review

In 2013, the Ministry embarked on a major reform of probation services. It created Community Rehabilitation Companies (CRCs) to manage low or medium risk offenders and the National Probation Service (NPS) to manage those posing higher risks. It amended its contracts with CRCs in 2017 to increase their income and stabilise failing services, but in July 2018 the Ministry announced these would be terminated 14 months early, in December 2020¹.

By March 2017, mid-way through the reforms, there was an overall 2.5 percentage point reduction in the proportion of reoffenders since 2011, but there was a 22% overall increase in the number of reoffences per reoffender. The Ministry expected CRCs to reduce reoffending by 3.7 percentage points over the life of the contracts, resulting in £10.4 billion of economic benefits. By March 2017, just six of the 21 CRCs consistently achieved significant reductions in the number of reoffenders.

The Ministry also has not achieved its wider objectives. Only two CRCs have delivered the IT innovation they promised and the number of people recalled to prison has increased by 47% as a result of statutory rehabilitation being extended to those serving sentences of less than 12 months. Offenders serving short sentences often find it difficult to comply with license conditions and available supervision has not been appropriate to reflect the diverse needs of these people. Between January 2015 and September 2018, offenders on short sentences as a percentage of those recalled to prison rose from 3% to 36%.  

Her Majesty’s Inspectorate of Probation found that CRCs have performed poorly overall, with nine out of 13 inspections assessing CRCs negatively for the quality of their work in reducing reoffending and protecting the public, and five negatively for abiding by the sentence of the courts. The NPS’s performance has been stronger, with all inspected NPS areas assessed positively for abiding by the sentence of the court, and 10 positively for protecting the public and reducing reoffending. However, the NPS has been constrained by severe staff shortages and high workloads. In August 2018, its overall staff vacancy rate was 11%, and as high as 20% in London.

The Ministry’s contracts have proved to be ineffective, hampering its ability to hold providers to account for poor services. It designed outcome-based contracts to encourage CRCs to innovate, but this did not fit well with its low risk appetite for failure. As it takes two years for data on reoffending to become available, and changes in reoffending cannot be directly attributed to CRCs’ interventions, its payment by results model was inappropriate for probation services.

The Ministry designed and implemented its reforms too quickly. It sought to transfer the risk of lower volumes of probation work to CRCs, but only tested the impact of volumes reducing by 2%. Two years into the contracts, volumes were between 16% and 48% lower than anticipated. Although this meant the Ministry was paying less to CRCs, it overestimated their ability to reduce costs as their income fell, which put them under financial pressure and affected their willingness to invest in probation services and their transformation plans.

By March 2018, CRCs faced collective losses of £294 million over the life of the contracts, compared to expected profits of £269 million, increasing the risk of providers withdrawing services, performance deteriorating further and potentially multiple providers becoming insolvent. Terminating these contracts will cost taxpayers at least £171 million². The Ministry originally expected to pay CRCs up to £3.7 billion over the life of the contracts, but by August 2018 it was expecting to pay CRCs £2.3 billion through to December 2020 when it ends its contracts. Yet, together with its earlier unsuccessful efforts to stabilise CRCs, the Ministry will pay at least £467 million more than was required under the original contracts. The full costs will not be known until at least December 2020.

The Ministry has acted on many of the shortcomings in the reforms, including abandoning payment by results, but the NAO has identified risks with its proposals. For example, while the Ministry plans to better align probation regions, it has proposed retaining the split between the NPS and CRCs, meaning it still faces the challenge of ensuring these services work well together and with the wider system. It will also need to manage the risks of transitioning to the new contracts and existing providers withdrawing services or failing outright. For example, on 14 February, Working Links, owner of three CRCs, entered administration. The Ministry implemented its contingency plans and announced that Kent, Surrey and Sussex CRC, owned by Seetec, would become responsible for the three Working Links CRCs.

With limited time to procure new contracts, the Ministry should pause and reflect on whether its proposed approach is both deliverable and consistent with its strategic aims for the probation system, and in doing so it should consider how it will respond to the risks set out in this report. In parallel, it should publish a cross-government strategy that spells out how it will work with other bodies to reduce reoffending and develop a detailed plan for managing the wind-down period of its existing contracts.

Amyas Morse, the head of the NAO, said today:

“The Ministry set itself up to fail in how it approached probation reforms. Its rushed roll-out created significant risks that it was unable to manage. These have had far reaching consequences. Not only have these failings been extremely costly for taxpayers, but we have seen the number of people on short sentences recalled to prison skyrocket. It is welcome that the Ministry’s proposals address some of the issues that have caused problems, but risks remain. It needs to pause and think carefully about its next steps so that it can get things right this time and improve the quality of probation services.”

Key facts

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Notes for Editors 

1. The Ministry, through HM Prison and Probation Service (HMPPS), is responsible for probation services in England and Wales. As at June 2018, 260,000 offenders were supervised by probation services, which are delivered in courts, prisons and in the community.
2. The agreement to terminate the contracts comes at a further cost to the taxpayer of at least £171 million. The Ministry has reached agreements with CRCs to limit their forecast liabilities from payment by results (£114.8 million), to spend more to deliver enhanced Through the Gate services (£43 million) and made other technical adjustments to the payment mechanism (£13.2 million).