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Looters carry boxes out of a home cinema shop in central Birmingham, August 9, 2011.
Credit: Reuters/Darren StaplesBy Stefano AmbrogiPETERBOROUGH | Mon Oct 24, 2011 10:11am BST
PETERBOROUGH (Reuters) - More than three quarters of those charged during rioting which tore through English cities this summer were repeat offenders -- a problem Justice Secretary Kenneth Clarke has pinned on a "growing feral underclass" that urgently needs rehabilitating.
Now, a radical scheme launched by the Conservative-led coalition government in eastern England last year aims to use private money to reform convicts and cut reoffending rates.
The pilot project at Peterborough Prison, 120 kms (75 miles) north of London, is the first of its kind in the world to raise capital from 17 charitable trusts and philanthropists through what is known as a Social Impact Bond (SIB).
The money raised is then channelled into preventive social care programmes the government finds difficult to fund -- in this case professionals over a six-year period with the expertise to stop criminals reoffending.
David Hutchinson, chief executive officer of Social Finance, an ethical investment firm which raised the 5 million pound bond in conjunction with the Ministry of Justice, told Reuters there were early signs the scheme was working.
"We have anecdotal evidence we are having an impact on the ground. People are very frustrated that a lot of activity like this is funded by grants ... which can come to an end very abruptly," he said on the sidelines of a briefing close to the prison to mark the first year of the project.
"Here we have six years of visibility on people's spending which allows organisations to get stronger, we get better at managing them, and there is consistency of support to a group of vulnerable people which they haven't had before. So it's that consistency that builds quite a lot of value in this."
The scheme could be replicated in prisons across the country if it succeeded, he said.
Inmates, some of whom have landed themselves in jail some 20 times in just one year, are given intensive support in prison and mentors when they leave to help them find housing, wean them off drugs and eventually assist them with training and jobs.
Under the scheme's rules bondholders are paid a return by the taxpayer only if reoffending rates are cut amongst a target group of 3,000 male inmates serving short sentences over a six-year period - the life term of the bond.
As with conventional bonds if reconvictions are not cut, no returns are paid. Reoffending rates must fall by at least 7.5 percent for investors to see a return of about 7.5 percent per year. The higher the cut to reconvictions the higher the return, though they are capped at 13 percent.
Hutchinson, a former top City banker, says breaking the costly cycle of reoffending not only saved money within the prison system, but through policing, the courts and the probation service as well as benefiting society from reducing crime.
The National Audit Office estimates the social and economic costs of reoffending to be between 9.5 billion and 13 billion pounds a year, while the Ministry of Justice estimates the total cost of crime to the British economy to be in the order of 75 billion annually.
Those involved in the scheme readily admit it is ambitious --the country's prison population hit a record last month because of the riots and more than half of all inmates jailed for less than 12 months re-offend within a year.
REVOLUTIONARY SCHEME
Nevertheless it is generating excitement amongst some hardened social care professionals some of whom say it could revolutionise the way offenders are rehabilitated.
Nick Leader, director of Peterborough Prison, who has more than 25 years' experience in the prison service, called it the "most exciting project" he had ever been involved in.
Leader said that prior to the scheme there was no statutory obligation to help prisoners serving less than 12 months in jail. "You were just thrown out into the world without any structured support, this project fills that gap," he said.
Rob Owen, chief executive of the St Giles Trust, a specialist charity with a proven record in rehabilitating prisoners that is funded by the scheme, likened the service to finding the "Holy Grail".
He said, for the first time, the government was trying to forge "really intelligent partnerships" between agencies with different expertise.
"It will give the offender a fighting chance to change their behaviour.
Hutchinson told Reuters social impact bonds could eventually be offered to retail and even institutional investors in the future if they were seen to have worked.
"We are keen to make this more accessible to high net-worth individuals, to the mass affluent even. But we have to remember it is risk capital and it isn't copper-bottomed in terms of returns," he said.
Tax incentives provided by the government might make such an investment more attractive, he added.
"There is a lot of work to be done to make social investment much more accessible to a wider group ... but we are hopeful they will catch on."
(Reporting by Stefano Ambrogi)
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