Secretary of State for Justice and Lord Chancellor, Liz Truss, addressed delegates at the conservative party conference in Birmingham.
Liz Truss, the justice secretary, has already ordered a comprehensive review into the probation system

MTCNovo, the US prison services firm, could be stripped of a contract to provide probation services for offenders in London after providing such poor management that an official report warned “people are being put at risk”.

Dame Glenys Stacey, the HM Chief Inspector of Probation, said that “probation services in the north of London had deteriorated” to such an extent since MTCNovo took over that “people were more at risk as a result, and this was unacceptable”.

The inspector said a “lack of senior management focus and control meant some service users were not seen for weeks or months, and some were lost in the system altogether”. It said “there had been little or no likely impact on reducing reoffending”.

The report will feed growing concerns over the privatisation of the probation service after a series of critical reports by HM Inspectorate of Prisons and HM Inspectorate of Probation. 

Liz Truss, the justice secretary, has already ordered a comprehensive review into the probation system, which was partly privatised by her predecessor Chris Grayling in 2014. The Ministry of Justice confirmed on Wednesday that this was due to be completed by April. 

It also said it had told MTCNovo to invest a further £370,000 in temporary staffing and appointed an independent task force of probation experts to monitor performance. 

Sam Gyimah, justice minister, said MTCNovo’s performance was totally unacceptable. “An urgent improvement plan is now in place and I will not hesitate to take more action if necessary.”

He said they were looking at all contracts and were carrying out a review of the probation system in England and Wales. “This will improve the quality of our probation service, putting the focus on reducing reoffending by getting offenders off drugs and into training or work.” 

MTCNovo said that it was “already addressing the recommendations made in the report” as well as “legacy issues” inherited from the London Probation Trust. “We recognise the importance of independent inspection and appreciate we have a number of improvements to make.”

Seven-year probation contracts worth £3.7bn were given to companies including MTCNovo, Sodexo of France, Ingeus of Australia and Staffline, Interserve and Working Links of the UK to oversee 250,000 medium- and low-risk offenders.

But probation providers complained that their contracts were loss-making and unsustainable because they were based on incorrect assumptions provided by the Ministry of Justice when they bid for the contracts two years ago. 

MTCNovo runs two out of the 21 community rehabilitation companies (CRCs) set up to deliver the service, including the North London region.

The London CRC is the largest in the country by contract value but work volumes — and therefore revenues — are 12 per cent lower than anticipated. MTCNovo owns a neighbouring CRC, Thames Valley, where work volumes are also 12 per cent lower than anticipated.

MTCNovo has cut front-line employee numbers by 15 per cent — broadly in line with the fall in work volumes. Staff morale is low, with vacancies running at 20 per cent, while the number of offices has been reduced from 40 to 27 raising concerns that offenders will struggle to access support, the report said.

Napo, the probation workers’ union, said “staff in London have done their utmost to make MTCNovo’s operating model work despite considerable professional reservations. It must be remembered that these are the same staff that previously delivered award-winning probation services when working for the public sector in London Probation Trust.”

It questioned whether Mr Grayling’s reforms were a “reckless ideological and politically-driven agenda, rather than an approach based on sound evidence”.

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