Prison contracts run into trouble

THE government has been accused of mismanagement after two major prison privatisation moves have fallen foul of European employment law.

The Prison Department has been forced to review 150 redundancy notices issued to staff at its supply and transport division in Corby, Northamptonshire, after apparently awarding the contract to an outside company. And plans to contract out Strangeways prison, Manchester, have been delayed while new documentation is sent to tenderers advising them of the likely increased costs of the European directive, which protects employees' rights.

The Home Office has already been forced to delay plans to contract out prison education, pending a court challenge by Kent County Council. Yet news of the setbacks comes on the eve of Commons debate of new rules to enable much greater privatisation of prisons by the end of the year.

Labour yesterday tabled a series of questions aimed at finding out how much the privatisation difficulties have cost the taxpayer. Only last week Kenneth Clarke, the Home Secretary, was criticised for wasting about pounds 30m when he abandoned plans to move the Prison Service to Derby. Joan Ruddock, Labour's Home Office, spokeswoman, said: 'The whole market testing process in the Home Office is a shambles.'

European law prevents companies altering employment conditions of government employees when they take over staff services after privatisation. Companies are forbidden to worsen employment conditions.

The Home Office, in common with a number of other government departments, had failed to take this into account when contracting out services. When it decided to close the Corby depot and award the contract to supply the country's 130 prisons to an outside company, unions alleged this would be contrary to the European Community directive which protects existing terms and conditions of staff.

Harry Fletcher, of the National Association of Probation Officers, said: 'The unions involved believe the whole privatisation affair is plagued with financial mismanagement and a low level of competence. It is based on dogma and not common sense or service delivery.' Stephen Shaw, of the Prison Reform Trust, said: 'One of the key issues will be the extent to which the European directive will preclude the contracting out of other prison establishments.'