The prison population has increased to over 85,000 and spending on rehabilitation has reached record levels; yet reoffending rates remain stubbornly high in the UK. There is widespread agreement within the coalition government that the country is in need of a 'rehabilitation revolution'. However, rather than government deciding such initiatives centrally, the Ministry of Justice is proposing a much greater role for the private and voluntary sectors. Furthermore, it anticipates that for some groups of offenders providers of rehabilitation services should be paid only to the extent that they are successful in reducing reoffending; Payment by Results (PbR).

Drawing on the commercial experience of the author, 'Rehabilitation Works: ensuring Payment by Results' cuts reoffending assesses the practicalities of implementing a PbR regime for reducing reoffending. How should the system be designed so as to avoid the risk of 'parking and creaming' of clients or offenders? And in what way can it be ensured that a diverse provider base is created, where SMEs and third sector organisations are not priced out of the bidding process? In order for a PbR model to be effective, there must be a diverse provider market and a commercial framework ensuring providers can generate a return whilst also offering the government value for money as a result of the policy. This paper recommends a phased introduction of outcome based payment mechanisms and stresses that the scheme will not be effective if offenders are treated as a single generic group.