Another day, another payment by results (PbR) story in the media… At least, that’s how it feels at the moment. After doing a blog post only a week ago about CAF’s recently-published report on using social investment to support charities delivering PbR contracts, and the fact that this appeared to reflect an upsurge of interest in this topic,yesterday saw David Cameron giving a major speech on rehabilitation in the criminal justice system in which he placed PbR at the centre of government policy.
The timeliness of our report was confirmed by the fact that quotes we put out in response to Cameron’s speech were picked up by the BBC (here) and the Guardian (here). We were reiterating the point that PbR has the potential to be a positive thing for charities, but the problems with the way that it is being implemented (as detailed in our report) mean that charities are in danger of being squeezed out by large private sector providers.
The Prime Minister’s speech came on the back of an announcement a few weeks ago by the Justice Minister, Chris Grayling, that existing PbR pilots in rehabilitation were to be put on hold. I had interpreted this as a sign that the MoJ was rowing back a bit on PbR, but Au contraire, apparently. They were not in fact rowing back, but merely pausing to fit the “rocket boosters” that David Cameron has now said he wants to see under this policy. This means that rather than reducing the number of PbR rehabilitation schemes in operation, the MoJ wants to roll the existing pilots out across the whole country. David Cameron himself stated an ambition that “By the end of 2015… payment by results is spread right across rehabilitation.”
I think the positive thing that can be said for this announcement is that it is ‘good to be enthusiastic about things’. And, as I argued in our report, PbR definitely has the potential to offer not-for-profits the opportunity to play a key role in delivering more efficient and effective public services. The concern however, is that the government is rushing ahead with this agenda while there are still significant implementation problems affecting not-for-profits (as detailed in our report) and little evidence that PbR actually delivers better outcomes. Unless these known problems are addressed, it is very unlikely that improved outcomes will actually be achieved.
Listening to Chris Grayling on the Today Programme, it was clear that many questions remain unanswered. He was adamant that this PbR expansion will not simply result in rehabilitation services being run by private companies, and that charities are seen as a crucial part of the agenda. However, this brings us back to the central problem that PbR poses for not-for-profits, which is that providers require significant working capital in order to be able to deliver these kinds of contracts. I highlighted this in CAF’s PbR report, and also pointed out that the social investors who would be willing to offer finance to bridge this working capital gap are also being held back by the way PbR contracts are being implemented.
Grayling was also faced with the question of what evidence there is of the success of the PbR that warrants putting all the Government’s eggs in this basket in the area of rehabilitation. Since it is pitched as the rolling-out of existing pilots, is there solid evidence that these pilots have been successful? Unfortunately, as he was forced to point out, the answer is no, not really. The only significant pilot in operation at the moment (and unsurprisingly the one referenced by Grayling in his interview) is the one at HMP Peterborough that is financed by the world’s first social impact bond (SIB), and the final results of that will not be known until 2014. Social Finance Ltd, who set up the SIB, even put out their own statement cautiously welcoming the Government’s commitment to rehabilitation but reiterating that the only evidence of success in their own scheme so far is anecdotal rather than quantitative. A report earlier this year by the MoJ itself was cautious about claiming that the pilot could be judged a success yet.
Grayling also cited his experience in DWP with the Work Programme as evidence of the success of PbR. I would imagine a lot of charities hope that this does not mean that he intends to replicate the prime contractor/subcontractor model in the criminal justice system, given the largely negative experience of not-for-profits delivering services through the Work Programme.
It seems as though PbR is at the very heart of the Coalition’s approach to reforming public services. This is why it is vital that the concerns of charities and social investors are heard. If they are not, then there is a real danger that instead of a wide social economy of providers delivering improved outcomes for service users, there will a carve-up between a narrow group of existing service provision behemoths (Serco, Capita, A4e etc) to the probable detriment of all.