Philip Salter
Philip Salter is Director of The Entrepreneurs Network. He started his career as Programmes Director at the Adam Smith Institute, running the Institute’s events, student activities and researching and representing the Institute on education policy in the media. After three years with the Adam Smith Institute he moved into journalism, becoming Business Features Editor of City A.M., after which he was Editor across EMEA for one of world’s largest insurance brokers. While at City A.M. Philip wrote a weekly column on entrepreneurship and interviewed some of Britain’s leading entrepreneurs. He now writes a regular column for Forbes.
He tweets as @Philip_Salter and @TenThinkTank.
George Osborne has only tinkered with the welfare state
There’s no doubt that the Comprehensive Spending Review contains severe cuts. But it is misleading to focus too much on specific areas of spending, while neglecting the bigger picture. Overall spending is only going to fall by 2 or 3 per cent in real terms, returning us to 2008 levels of spending. It’s hardly the public sector apocalypse that some commentators would have you believe.
Indeed, there is a case for saying that George Osborne should have gone further. The Labour government increased spending by almost 60 per cent between 1997 and 2010, so there remains plenty of waste to target. Nevertheless, efficiency can only take you so far. Even if you trimmed every ounce of fat from the public sector, governments would still struggle to keep spending under control, because demographic changes mean that the burden of the welfare state is going to grow unbearably large in the years ahead.
One respected international organisation, the Bank of International Settlements, has even predicted that our debt will soar to more than five times GDP by 2040 if we stick with current policies – a disastrous state of affairs, which would leave us spending three-quarters of our tax revenue on debt interest payments.
And here’s where George Osborne’s spending review falls down. Although he tinkered around the edges of the benefits system, and even announced a rise in the retirement age, he failed to question the fundamental assumptions behind the modern welfare state. But questioning those assumptions is precisely what we need to.
I’m not talking about free schools, or the NHS internal market, or even Iain Duncan Smith’s welfare plans, welcome as all those things are. What I’m talking about is abandoning the comprehensive, universal, free-at-the-point-of-use ethos that formed the basis of the post-war settlement.
We can’t continue paying today’s pensions with today’s tax revenues, for example – the sums just don’t add up. We need to move towards a fully funded model like Chile’s, where people have to save for their own retirements, and the sooner we do so the better. We can’t afford to make the NHS sacrosanct either: we must learn from Singapore, where people have to put money aside for their health costs, and government support is targeted only on those who can’t take care of themselves.
These are just two examples, but their guiding principle can be applied across the board: government should always act as a safety net, but nothing more. In the long run, that mature reassessment of the welfare state is the only way we will avoid fiscal calamity.
Published in the Daily Telegraph here.
Competing for convicts?
To solve these problems, remove the state monopoly in prison provision and allow the private sector to build and run new prisons.
In the United States there is a thriving market in the provision and operation of private prisons. Around 30 of the 50 states in the US now make use of private prisons.
Several private companies compete for prison contracts. Correctional Services Corporation, which became a public quoted company in February 1994, is one of the largest. It manages jails and detention facilities in 19 states as well as in Puerto Rico. The company has three divisions: adult, juvenile and community corrections. In 1994 CSC formed an alliance with the French company, Sodexho. Together they operate prisons in the United Kingdom and Australia. CSC is one of Wall Street’s top performing stocks.
Another leading US firm in this rapidly developing market is Wackenhut Corrections Corporation, founded in 1984. It currently manages 55 prisons, not just in the UK, US and Australia, but in Puerto Rico, South Africa, Canada, and New Zealand. In the UK, the company operates the immigration detention centre at Gatwick airport and manages four prisons in a joint venture with Serco.
In the UK, competition was introduced gradually. The first private remand prison, the Wolds, operated by Group 4 Remand Services, opened in 1992. A second prison for convicted adults was opened in May 1993 in Redditch, run by UK Detention Services. Meanwhile, the Prison Service was established as an agency in April 1993, giving it greater managerial freedom.
Competition works. The new privately built and operated prisons have established new standards in efficiency, facilities, and prisoner welfare and training. In the UK, the Inspector of Prisons, an independent watchdog, consistently reports that standards of care are higher, and problems (such as assaults and disorder) are lower, than in government-run prisons, while in private prisons, inmates spend more of their time, more purposefully, outside their cells.
Despite all this, the average cost of public-sector jails in the UK was 15 per cent higher than private jails in 1998 – though market testing has helped to reduce this gap.
Private prison providers also do more rehabilitation work with their inmates. Prison industries flourish, for example. In 1999, Corrections Corporation of America became the first US prison service, public or private, to win a national accreditation sponsorship for its vocational trades courses. Offenders who participate in this programme enjoy a much wider choice of jobs once they are released, reducing their chances of returning to crime (and its costs to society). The company is planning to expand its training programmes in prisons in Colorado, Florida, Georgia and Oklahoma.
Whereas it took 15 to 20 years to build new prisons in US states, private prisons have been built in 6 to 9 months. In the UK it used to take ten to twelve years to build a prison: private companies have demonstrated their ability to build jails in less than 9 months.
Though not perfect, the fact is that overall, private prisons perform better on every key measure. Privately built and managed prisons offer a much better chance of addressing offenders’ core problems, treating them humanely (and at lower cost), and making them fit to make a positive contribution to society.