“Probation is a complex social service, and it has proved well-nigh impossible to reduce it to a set of contractual requirements.” Such was the conclusion of HM Chief Inspector of Probation when the government announced this week that they were re-nationalising the delivery of some probation services. If outsourcing led to improved outcomes at lower costs through competition-led innovation and efficiencies, most people would be happy. On the other hand, if outsourcing of complex services generally ends in failure, how many more times do we need to read these headlines before new approaches are tested? 

Probation may not be the first service that people care about when questioned but this changes when someone on licence commits further high profile crimes, or when you find yourself involved in the criminal justice system either as a victim or perpetrator. There are ideological objections to privatisation such as whether it is appropriate to run such sensitive services working with people with complex needs, or the impact of using a profit motive as the primary driver of improvement, etc. But there are also practical challenges. 

Time and again we see the failure of outsourcing contracts for public services; from the bankruptcy of Carillion (which amongst other things held a substantial number of prison maintenance contracts) to Virgin trains’ failure to run the East coast mainline, to the care scandal of Winterbourne View to A4E’s Work Programme. When margins are so tight that there is little – if any – profit to be made, providers will act in ways that game the contracts at the expense of the quality of service experienced by those it is intended to help. Ultimately, service failure is inevitable, whether through bankruptcy, unacceptable service quality, scandal (or a combination of all three) and it is the taxpayer who foots the bill. 

The Transforming Rehabilitation programme launched in 2013 divided the probation service in two, with the National Probation Service charged with overseeing people deemed to be higher risk, with private, community rehabilitation companies (CRCs) taking on responsibility of overseeing those people deemed to be low and medium risk. Together this represents a service costing £3.7bn each year and handling around around 250,000 people, 

In the three years to March 2018 the 21 CRCs had accrued collective losses of nearly £300m compared to expected profits of £269m. One provider running three of the CRCs had already gone into administration. The cost of terminating the contracts early is expected to cost a minimum of £171m. The recent National Audit Office report calculated that the total cost of ending the outsourcing of part of the probation service is nearly £500m. This is not to count the human cost. 

The Prime Minister’s response to the bankruptcy of Carillion was to say that “without the invention, innovation and creativity of private enterprise, working in partnership with strategic and democratically accountable governments and local councils, we would not be able to build the roads and railways, hospitals and schools, sports stadiums and shopping centres that we use, day in and day out. Neither can do it on their own – it is that partnership that makes it happen”. This is not difficult to argue with. But the distinction here is that the examples given are all complicated capital projects. They are not complex social challenges. It is the inability to make this distinction, and use different, flexible approaches for commissioning against complex social issues, that leads inevitably to outsourcing failure. 

Addressing complex social challenges needs nuanced, flexible and responsive approaches. Traditional commissioning and contractual processes are not fit for this purpose. It is impossible to specify the service and its innovation in a tender document, an admission made by the Lord Chancellor and Secretary of State for Justice David Gauke (Today Programme, 16th May 2019.). 

This blog is not the place to dig too deeply into this issue, but it is important to question why the assumption persists that it is only the private sector that holds the mandate for innovation. This is largely the product of political ideology based on neoliberal economics. But, as Marianna Mazzucato most eloquently argues, this is simply not the case. Despite this the assumption continues to be perpetuated by government ministers including David Gauke who in the same speech went on to say “we should be making use of the innovation that comes from a diverse range of service providers, and its right that we make use of both private and voluntary sector”. Of course, but there is also much innovative practice within the public sector.

Prior to the implementation of the changes to probation by then Justice Secretary Chris Grayling, many criminal justice experts warned of the risk of splitting the services, creaming off the lower risk offenders for the private sector to manage and introducing a payment by results regime. They called for the changes to be piloted first so that emerging issues could be identified and addressed, but political expediency meant the reforms were rushed through. The idea of understanding the wider system alongside testing and learning prior to wider-scale roll-out of policy change is something we continuously call for here at the RSA in our advocation of ‘thinking systemically, acting entrepreneurially’.