July 1, 2010 3:00 am

Clarke's prison shake-up raises doubts on cuts

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Ken Clarke yesterday castigated former Labour home secretaries David Blunkett and John Reid for drawing up prison policy with "a cheque book in one hand and a copy of the Daily Mail in the other".

It was a typically colourful admonition from the justice secretary, but the painful truth is that, unlike him, they had cheque books to brandish.

In a shibboleth-slaying speech in London, Mr Clarke promised to reverse decades of Tory policy on "banging up more and more people" and end the prison-building arms race pursued by successive Conservative and Labour governments. To the fury of his party's right wing, he promised a root and branch review of sentencing, including a possible end to short jail terms.

Mr Clarke's team appears genuine in its desire to bring about a "rehabilitation revolution" after seeing that prison does not work in many cases and that most inmates return to crime when they are freed.

Nevertheless, the radical nature of what he unveiled yesterday was driven as much by a desperate search for departmental savings of at least 25 per cent.

Not everybody thinks targeting shorter sentences will deliver big cuts. Max Chambers of the Policy Exchange, a right of centre think-tank, argues that people on sentences of less than a year take up only 9,000 of the 87,000 available jail places. "Half of short- term prisoners have 15 or more previous convictions, so just arbitrarily stopping that is not the right answer," he said.

The Policy Exchange believes the reasons for the unsustainable rise in the jail population are harsh long-term sentences and a reluctance to consider parole for more serious offenders.

Prison reformers, however, insist big savings can be made by switching to community punishment for minor criminals, particularly drug addicts. Make Justice Work, a campaign group, says that across a lifetime it is £60,000 cheaper to give a drug offender community-based treatment than to send him to prison.

This has shaped Mr Clarke's view that community sentences are cheaper than the £45,000 it takes to keep someone behind bars for a year. As a result, he wants charities and private companies to take over rehabilitating minor criminals and will pay them a fee if they keep people out of jail.

David Hanson, shadow prisons minister, said he agreed with Mr Clarke's aims but claimed they would be unaffordable as he slashes the £4bn prisons and probation bill. "Where I disagree is that this takes resources too," he said.

However, David Hutch-ison of Social Finance, the investment fund behind an innovative rehabilitation scheme at Peterborough prison mentioned by Mr Clarke yesterday, believes "payment by results" can be funded without heavy Whitehall investment.

Mr Hutchison, a former Dresdner Kleinwort banker, said: "We're not talking about big upfront capital costs. It's not as if we're building training centres."

Mr Clarke stressed yesterday that his speech did not herald immediate cuts in prison places. Long-running talks on two building contracts are close to being finalised. However, plans to build another five 1,500-capacity jails will be cut back, with only "one or two" likely, according to the private sector.

This leaves Mr Clarke with a short-term dilemma of how to squeeze more inmates into the creaking prison estate while he cuts costs and waits for sentencing changes to take effect.

One private sector executive said he was ready to provide floating prisons or cheap pre-fabricated jails. Companies also claim they can run prisons cheaper than the public sector if they are allowed to take more over, although this is disputed by some experts.

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