The Howard League for Penal Reform has questioned whether proposals by the Ministry of Justice to outsource most probation services to private and voluntary sector organisations can go ahead in the wake of the investigation into the contractors G4S and Serco.
Chris Grayling, the Secretary of State for Justice, told MPs yesterday that the government had asked the Serious Fraud Office to consider investigating G4S after an independent audit by the financial services firm PwC found that it over-billed the government by millions of pounds on electronic tagging work.
Grayling said that Serco had agreed to cooperate fully with a full forensic audit of all of the MoJ’s contracts with it, after evidence of over-charging on services had been found.
He said the department had ordered an independent audit of electronic monitoring contracts with G4S Care and Justice Services and Serco Monitoring earlier this year after it identified what appeared to be a "significant anomaly in the billing practices under the current contracts".
He said the audit had found that charges had been made for electronic monitoring in cases such as when a subject was back in prison and had their tag removed, or even when the subject had died. He said the sums involved were estimated to run into the low tens of millions of pounds for both companies since the contracts started in 2005.
He said Francis Maude, the Minister for the Cabinet Office, would instigate a review of all contracts held by G4S and Serco with the government. "In addition, this review will determine how government will better manage similar contracts in the future," he said.
Andrew Neilson, director of campaigns at the Howard League for Penal Reform, said the news could derail the government’s recent proposals to outsource most probation services, if these investigations meant that G4S and Serco would not be able to bid for any large contracts involved.
"The MoJ needs G4S and Serco to bid for large contracts," he said. "No charities have the capacity to bid for those contracts by themselves anyway. They will be dependent on working with private companies. This throws all of that into doubt."
Clive Martin, director of Clinks, the umbrella body for criminal justice charities, warned of the possible knock-on effects for small charities that had contracts with either company.
"This situation strengthens Clinks’s argument for good governance of supply chain mechanisms under the transforming rehabilitation reforms," he said.
"In a complicated contractual framework, safeguards are needed to remove the potential for error or unscrupulous practice on the part of large primes. The impact of this is problematic enough for government, but for a small voluntary organisation in a supply chain it could lead to closure and a loss of valuable front-line services."
Joe Irvin, chief executive of the local infrastructure body Navca, said the news "raises questions about private contractors and what on earth the public commissioners were thinking".
Sir Stephen Bubb, head of the chief executives body Acevo, said the allegations were shocking and should be carefully investigated but should not derail the progress of public sector reform. "Partnerships with the private sector can help charities to reach more vulnerable people with the services they provide," he said. "We must continue to focus on their needs and not be distracted by an ideological battle."
Serco said in a statement that it had agreed with the MoJ that a detailed investigation into the contracts should continue with its full cooperation and confirmed that it would repay any due amount agreed. Christopher Hyman, chief executive of Serco Group, said: "We will not tolerate poor practice and behaviour, and wherever it is found we will put it right."
A statement from G4S said it was "committed to addressing and resolving the MoJ’s concerns as soon as possible".
The company had cooperated fully with the PwC audit and would cooperate fully with any further investigations.
"The justice secretary has confirmed that, after the PwC audit, he has no evidence of any dishonesty in relation to the electronic monitoring," the statement said. "G4S is conducting its own review, assisted by external advisers, and is not aware of any indications of dishonesty or misconduct."