National Audit Office (NAO) Report on CRC Bail Out

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In August last year, Napo, UNISON and GMB/SCOOP wrote to the National Audit Office to draw attention to the lack of transparency in the MOJ’s multi-million pound bail out of the CRC contracts which had taken place at the end of July 2017.

As a result of the joint union letter, the NAO undertook a detailed investigation into the bail out.

The NAO report of the findings of the investigation can be found here:

The report is detailed, but in summary reveals that:

  • CRCs are paid for the volume of rehabilitation activity which they provide, not the number of clients supervised
  • The MOJ claimed originally that it would transfer the commercial risk of future volumes of rehabilitation activity going down, as well as up, to the CRCs
  • The MOJ obtained parent company guarantees that financial protection would be provided for the taxpayer should the CRCs seriously underperform
  • The volume of rehabilitation activity actually went down, but the commercial risk attached to this was not transferred as promised to the CRCs, but was handed back to the taxpayer
  • The MOJ ended up paying the CRCs more in 2016/17 than was contractually required in order to keep them afloat
  • The CRCs under-estimated their fixed costs when bidding for the contracts, but the MOJ agreed that the taxpayer, not the private companies, should shoulder these costs as well
  • So far this has all cost the taxpayer an additional £342 million
  • By the end of June 2017, CRCs had, on average, met just 8 of the 24 targets set for them under their contracts. The worst performing CRC, met only 4 of its 24 targets.
  • Although it is entitled to fine the CRCs for poor performance, the MOJ has either waived, or allowed CRCs to ‘re-invest,  71% of the total of the fines which were due to the taxpayer
  • One of the options which the MOJ considered in respect of the poor performance of the CRCs was to terminate some, or all, of the CRC contracts, but decided instead to let the taxpayer take the strain of the failing contracts by amending the contract payment mechanisms to give the CRCs more money.

Napo, UNISON and GMB/SCOOP call upon the government to take the failing CRC contracts back into public ownership to protect the UK taxpayer from further expense in propping up unsustainable private companies.

The Parliamentary Public Accounts Committee is due to hold a session on the NAO Report on 17 January.