Prison payment-by-results pilot begins

By politics.co.uk staff

The world’s first payment-by-results scheme for rehabilitating prisoners is getting underway today.

Three thousand short-sentence inmates at Peterborough prison will be the subject of a pilot scheme giving private investors the opportunity to make money from the government – if they succeed.

Businesses have provided £5 million of social impact bonds which could reap up to £8 million of payments from the government and Big Lottery Fund if successful. The initiative will be deemed a success if reoffending drops by 7.5% or more. If it fails investors will not receive any return.

Justice secretary Ken Clarke said the scheme, which was originally proposed by Labour, could help reduce the proportion of prisoners who reoffend within a year of leaving jail – currently at 60%.

“It pays by results,” he said.

“We’re going to pay what works and what works should therefore grow and what doesn’t work will vanish. I like the innovative funding, the payment by results, the collaborative groups, and if it succeeds if will grow and if it doesn’t, by that time we will be trying something else.

“But sooner or later, something has got to be done about re-offending.”

The Ministry of Justice is jointly running the scheme with Social Finance, a social investment organisation.

Its chief executive David Hutchison has ambitious plans for the concept of the new financial instrument.

“We see this pilot as an important first step in rolling out the Social impact bond (Sib) more widely in the future,” he said earlier this year.

“There is scarcely an area of social or health care policy where prevention or early intervention isn’t both cost effective and socially desirable.

“We envisage that future applications of the SiB might cover such disparate programmes as enhanced support for foster carers, home care services for older people or nursing in the home for the chronically sick.”