---

Prisons Competition

With permission, Mr Speaker, I should like to make a statement. The House will be aware that in 2009 my predecessor announced a competition for the management of five prisons: Her Majesty's prisons at Birmingham, Buckley Hall in Rochdale, Doncaster, Wellingborough and the new prison, currently called Featherstone 2, near Wolverhampton, which is due to open in 2012. I am now able to announce the results of that competition process. Let me remind the House that these prisons were selected by the right hon. Member for Blackburn (Mr Straw) for a variety of reasons. Birmingham and Wellingborough are currently managed by the public sector and were chosen after being identified by the National Offender Management Service as performing poorly. Buckley Hall and Doncaster are establishments that have been previously competed and their contract is due for renewal. Buckley Hall is currently managed by the public sector and Doncaster is currently managed by Serco. During the preparations for the bid it became apparent that competition could not produce improvements at HMP Wellingborough without significant capital investment to secure its long-term viability. In the current financial climate, this is clearly not a tenable proposition, so I took the decision to remove it from the competition process. HMP Wellingborough will continue to be managed by the public sector, and will need to deliver approximately 10% efficiency savings, in line with other public sector prisons, over the next four years. I am now able to announce the results of the four remaining prison competitions. HMP Birmingham will be run by G4S plc. HMP Buckley Hall will be run by HM Prison Service. HMP Doncaster will be run by Serco Group plc. Featherstone 2 will be run by G4S plc. The new contracts will be effective from October 2011 for the prisons at Birmingham, Buckley Hall and Doncaster, and from April 2012 for Featherstone 2. I would like to put on record my thanks to all the bidders for contributing to what has been a challenging contest, which will secure significant quality improvements and savings at all the establishments involved. The Government are committed to delivering reform in our public services. This process shows that competition can deliver innovation, efficiency and better value for money for the taxpayer, but also that it can do so without compromising standards. Before the bids were evaluated for anything else, they needed to demonstrate their fundamental ability to provide safe and secure custodial services. I can confirm that over the spending review period the new contracts will deliver savings of over £21 million for the three existing prisons. In the same period, the new Featherstone 2 prison will be delivered at £31 million less than the costs originally approved by the previous Government. Cumulative savings over the lifetime of the contracts for the three existing prisons are a very impressive £216 million. But public protection is not just about how we manage prisons in order to punish people. It is also about how we achieve genuine and long-lasting reductions in crime by cutting reoffending. I am therefore particularly pleased to be able to announce that, for the first time, the contract award for HMP Doncaster will include an element of payment by results in reducing reoffending. Payment by results is central to our rehabilitation reform plans, because it means that we can concentrate on paying for what works to reduce reoffending. The current system funds services, but not outcomes. Providers of services face few consequences if what they offer does not succeed in cutting reoffending, and little reward if they do succeed in cutting reoffending. Payment by results looks to change this by rewarding performance against the outcomes specified in a contract. In the Green Paper I outlined plans to develop this policy further and commission at least six new pilots for payment by results. The contract for HMP Doncaster is an important first step towards fulfilling this commitment. The new contract price for HMP Doncaster will in itself deliver significant annual savings. In addition, however, the introduction of payment by results means that 10% of the contract price will be payable only if the operator reduces the reconviction rates of offenders a year after they are discharged from the prison by 5 percentage points. If they achieve this, the contract will, of course, have significantly reduced crime, and for a cost of at least £1 million below what we currently pay. I regard this as a win-win approach. It translates to savings for the taxpayer, lower reoffending rates and a return for the service provider that improves their performance. I know that Members on both sides of the House recognise the benefits of effective competition—at least I hope they still do. Today's announcement shows it has a significant role to play in delivering value for money, better outcomes and broader reform. I encourage providers from any sector to rise to the challenge. The public are entitled to expect safety and security and better results to go hand in hand with efficiency and innovation. I commend this statement to the House.