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The Financial Director interview – Prison security is about freedom, too

Julian Le Vay holds the purse strings to a #4bn estate, but as director of finance and procurement for HM Prison Service he has no bottom line, limited funding, and pats on the back are few and far between. But he must love the challenge – he has already held senior positions in the Police Service and Department of Health, and keeps coming back for more.

The private sector lure of fat profits and high salaries doesn’t do it for Le Vay, although he wouldn’t say no to the right offer. He appreciates the idea that making money, instead of juggling the finances of a berated public service, has its attractions. “I can see that it would be easier to feel that you’ve got a result as the FD of a private sector business.

But that is not what motivates me, or my colleagues. We are trying to get the best result for the taxpayer. One of my goals is to get the value for money part of that really embedded in people’s thinking in line management,” he says.

But, despite a steadying prison population and an improving escape record, Le Vay, and his director general Martin Narey, will never be endeared to the government, media or public. “My colleagues and I don’t pretend that there aren’t things that are seriously wrong in the Prison Service,” he says. “Nevertheless, the sense that you only get recognition for poor results is depressing. The job is simultaneously the most rewarding and frustrating I have done. Many public sector managers would agree. It is an odd environment to work in.”

HM Prison Service celebrated an anniversary on 1 April this year – eight years before, the service became a government agency with a remit to increase public awareness about prison operations and allow the management a degree of autonomy from the Home Office. But, as the General Election approaches, public sector departments find themselves on the political agenda, and management teams spend their days talking to ministers when they would rather be improving services.

Election campaigns and new ministerial changes are especially painful for Le Vay. Not only does he have to contend with the (in)efficiencies of the public sector – the constant testing of the fire alarm during our interview, for example – but he can find Treasury funding hard to come by. This is especially true because his agency is not a major vote winner.

The government does not campaign on the back of prison reform. “When the Prime Minister outlined his priorities, he did not say, ‘Prisons, prisons, prisons,’ he said, ‘Education, education, education,'” he says.

These days, he also finds himself in a job where media criticism is an everyday problem, especially when your only key financial target is to keep cost per prisoner down to under #37,418 in resource terms over the next year – a figure more than twice the national average wage. “If you work in the public sector you have to accept that public opinion in this country is going through a pretty negative phase,” he says. “There is a questioning of authority and a wish for bad news. There is no story so popular as a public service that is not delivering. The converse story never appears.”

Moreover, when one of his operating KPIs is the number of “self-inflicted deaths”, as the official literature terms it, Le Vay could be forgiven for being depressed about his work. But he understands that the human aspect of his job is one of the most important and he speaks openly on the subject of suicide. “When there is a suicide reported around the table at our Monday meetings it is very real,” he says. “I myself dealt with an investigation into suicides and it was harrowing. It is, even on the finance side, a very human job. Unlike many civil servants, we make decisions that directly affect the real world – that affect 44,000 staff and 66,000 prisoners and their families.”

You need specialised management skills to cope and Le Vay is not your run-of-the-mill FD – his only qualification is a degree in Anglo-Saxon. He says that experience, especially in dealing with emotive issues, is more important that financial expertise. “What is vital is an understanding of how to use finance in a public sector environment. That is not to say that we do not need accountants, but it is more important to understand how the pushes and pulls within government work.”

He does not concern himself with issues such as criminal policy and strategy – he has to operate with what comes through the gates. “We are the only public sector operation that I know of that has absolutely no control; even hospitals have waiting times,” says Le Vay. “It is not our business to decide the social value of keeping people in prisons. We try and do the best job we can while they are in our custody.”

The Prison Service has always been atypical of agencies. It is incredibly politically sensitive and there is a great deal of direct ministerial involvement. “Our director general, Martin Narey, will often meet with ministers two or three times a day,” he says. “Compare that with the Vehicle Licensing people down in Cardiff.”

However, the tensions between the service and government have a habit of surfacing at the highest level. Narey recently stated that he spent too much time in Whitehall and not enough time doing his job. He also hinted that he might soon leave the service, like his predecessor, Derek Lewis, who openly wanted an arms length relationship with ministers.

“There is an argument that greater managerial autonomy would get results but this would be very difficult to accomplish,” says Le Vay. “I doubt that parliament would accept such distance. So we have a lot of distractions. You have to square the circle as best you can.”

Le Vay can’t ignore the policy makers because they keep the finances under lock and key, and he knows that he must spend quality time with ministers if he is to stop funding passing him by. “It all depends where your programme is on the government agenda. At the moment education and the NHS are the priorities,” he says. But he is well versed in “the tricks of the trade” used to coax money out of the treasury – first you have to target the right people in government and then you have to convince them that you are dealing with business, as well as political, issues.

“To some extent the relationship between four people determines funding: The Prime Minister, Home Secretary, Chancellor and Chief Secretary. To use Stalin’s phrase the “Who’s Whom?” – those who hold real power. But we also try over a period of time to get Treasury officials to understand the business issues. They are often several levels removed from prison operations,” he says.

But sometimes it takes drastic measures to secure ministerial interest. In 1990 there were a horrendous series of riots, most notably in Manchester prison, as a result of overcrowding and dreadful conditions. Suddenly, the Prison Service found the pennies pouring in. “For a long time the riots were embedded in government’s psyche and there was a real political investment to stop that happening again, which meant more money. Strangeways created a sharp rise in prison spending,” he says.

Le Vay says that the effect of Manchester has now worn off, but he is relieved that the government is now being proactive, turning to an evidence-based research approach to prison programmes and teaching prisoners basic literacy and numeracy skills. However, there is a price to pay for rehabilitating offenders, especially if the Treasury finds new ways of applying financial handcuffs. “There is a growing tendency for the Treasury to be prescriptive.

For example, the education of prisoners is funded by the Department of Education,” he says. “Currently, 10% of all expenditure is ring-fenced, money that neither I nor the governors can move around. I am limited in my ability to switch funds. Joined-up government does have benefits – it brings in extra resources – but it can also be a headache.”

Recently, other initiatives have filtered down from Millbank. For example, as businesses have wised-up to the problems caused by resource accounting and have started to focus on cash, the government has decided to implement a resource accounting system.

Le Vay is not impressed. “We have been building up the financial management team, the systems and the skills base from a dismally low starting point in the early 90s. This has been building up in cash terms. Now we have to make a very difficult transition to resource accounting. We have gradually depressed the upward jolt of the hockey stick in the last quarter and resource accounting will have an even greater affect. Nevertheless, it is questionable how much resource accounting will improve our business results. If I look back in five years time, will I say that resource accounting has changed our business? I have to be a little bit sceptical on that point.”

One way of distancing the business of running prisons from government is by encouraging private investment. Out of headline figures of #2bn spent last year by the service, about #700m were goods and services brought in from the private sector. The big contracts were #115m for escort services and #170m for prison operations. Le Vay is especially keen on Private Finance Initiative (PFI) schemes, where the service makes a payment to a private company that is partly in respect of the repayment of capital borrowing that the contractors undertake, and partly for operating costs.

Under PFI schemes, private sector companies do everything – design and construct the prison, finance the operation and also run it. This reduces the problem of government short-termism. “The government never plans capital investment more than three years ahead, and this is just about the lead-in time for building a new prison,” says Le Vay. “We have something like #700m in backlog of maintenance and repairs – at very best we might just keep our heads above water, but we would never drain that sort of backlog. This is where resources and private sector involvement becomes an issue. There is a lack of freedom to use resources in the public sector, and there is not just a lack of focus, but a lack of sustained focus over time on key results. I feel very passionately about this subject.”

Freedom is a key issue for Le Vay – freedom from the constraints of government, the jaw-jaw of politicians and media, and the opportunity to do the job in hand without outside intervention. In effect, prisons should be run like businesses. “Focus is intuitively important,” he says. “Governors who have spent time in private sector prisons all agree. What they say is that they are given clear objectives – four, or five, six or ten things they have got to get right if they are to do their job successfully. Management makes the targets clear and it is the governors’ job to stick to them. I’ve never seen that in the NHS or Home Office or replicated anywhere in the public sector.”

Instead, there are an extraordinary number of public sector managers are only interested in two things: one is the minutiae of process, the day-to-day management, and the other is launching new initiatives. “What is in very short supply is people saying, ‘Well, hang on, we just want these people to do a set number of tasks. We will keep off their backs while still holding them to account, and let them focus on key tasks.’ This is an inherent weakness in the public sector,” he says.

Le Vay initially joined the Home Office because he “thought some of the issues were interesting”. Now, it seems, he has come up with a few interesting issues of his own.

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