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Public Policy: Using Market-Based Approaches There is some evidence that private-sector prisons may in fact achieve better quality of service in some areas than publicly-run prisons. There is evidence, for example, that private-sector prisons have better relations between staff and prisoners than publicly-run prisons. However, staff in public-sector prisons tend to have much more experience and are better paid than those in private prisons and inexperience has occasionally been cited as a problem with private prisons. Competitive tendering of prisons has been successful in improving cost efficiency. Two independent studies have estimated cost savings of between 10 and 15 per cent and between 13 and 22 per cent. These estimates are based on comparisons between the costs of privately-run prisons and the costs of comparable publicly-run prisons. They are likely to under-estimate overall cost savings because evidence suggests that competitive tendering has led to cost reductions in those prisons that remain under public-sector management, and even those that are not subject to competitive tendering, due to the diffusion of best practice. CHOICE-BASED LETTING IN SOCIAL HOUSING Choice-based lettings has been used to introduce user choice in the provision of social housing – housing which is made available by ‘not for profit’ bodies at below market rents. The common feature of all schemes is that applicants can indicate which properties they would like to be considered for, rather than waiting to be allocated a property that they might not want. The traditional method for allocating social housing has been as follows. Applicants for social housing join a waiting list administered by the local authority, or other social landlord. They will then be allocated points based on their assessed housing need (for example, whether they are homeless or living in overcrowded or unsatisfactory housing conditions) and the time they have been waiting on the list. When an applicant reaches the top of the list, in terms of the points they hold, the social landlord will offer them one of its vacant properties. The applicant will normally be allowed a limited number of opportunities to reject a property before they lose their place at the top of this list. Choice-based lettings introduces a limited market in social housing, analogous to the private housing market. Typically all vacant properties on a social landlord’s books are advertised to all applicants who have registered with it. These applicants then bid for individual properties. Where more than one applicant bids for the same property, it is allocated in one of a number of different ways, depending on the design of the scheme. The two most common approaches are points or a banding system. ● In a points-based scheme, applicants are allocated points based on assessed housing need and the time they have been waiting for a property. The property is then allocated to the applicant with the most points. 8
Section 1 – Introduction and summary ● In a banding system, applicants are allocated to certain bands based on their assessed housing need and other relevant circumstances. The property is then allocated to the applicant in the highest-priority band, and within that band to the applicant who has been waiting longest for a property. Choice-based letting schemes in the UK were inspired by the use of similar schemes in the Delft region of the Netherlands. In the UK, Market Harborough District Council introduced a district-wide scheme in April 2000, and Mansfield District Council introduced a more limited scheme at around the same time. Subsequently, the Office of the Deputy Prime Minister introduced a pilot scheme involving 27 authorities which ran from April 2001 until March 2003. A number of other authorities have subsequently adopted choice-based lettings, and by April 2004, 20 per cent of local authorities had adopted the approach. The Government has a target for all local authorities to adopt choice-based letting schemes by 2010. In introducing choice-based lettings, local authorities have had to address a number of implementation issues. First, they had to make significant investments in systems to advertise properties to potential tenants and provide them with enough information to make an informed choice. Second, positive action was taken to ensure that all applicants had reasonable access to this information and were equally well equipped to make a choice. The local authority provided information in different languages and provided support and advice. Consequently, the total resources needed to administer the schemes are similar to previous allocation schemes. Indeed, the administrative staff previously needed to allocate properties are now tackling these issues of information and equality of access. Choice-based lettings appear to have addressed a number of perceived problems with traditional allocation methods: ● Allocation lacked transparency: in traditional schemes, applicants did not know which properties were vacant and on what basis they were allocated to potential tenants. Choice-based lettings allows all applicants to see which properties are available, and to bid for those properties. Information is also produced on successful bidders for previous properties (how many points they had or how long they had been waiting). ● Perceptions of unfairness: in traditional schemes, allocation appeared to applicants to be at the discretion of local authority housing officers. Choicebased lettings introduced a transparent and objective allocation mechanism. ● Lack of empowerment: in traditional schemes, applicants had no influence over the process, whereas choice-based lettings allows them to take the initiative in selecting and bidding for properties. ● Undesirable incentives: in traditional schemes, applicants had an incentive to lobby local authority officers to move up the waiting list. The use of a more objective points scheme and the potential to obtain a property earlier by 9
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Page 5 and 6: Contents Acknowledgements vi Forewo
Page 7 and 8: Contents Section 11 Emissions Tradi
Page 9: Foreword There is increasing intere
Page 12 and 13: SECTION 1 Introduction and summary
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Page 22 and 23: SECTION 2 Using market mechanisms U
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Page 40 and 41: SECTION 4 Introduction This part of
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Public Policy: Using Market-Based A
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SECTION 8 Framework for assessing m
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Part IV Case Studies 73
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● the Green and White papers behi
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A prison failing to deliver on its
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Table 9.3 Companies providing priso
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Section 9 - Competitive Tendering o
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detect any deviation from a collusi
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at HMPS began as an equal mix of th
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(e.g. lighting). This impact could
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MARKET POWER The full benefits of c
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However, it should be noted that te
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on competition is uncertain. The ab
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Controlling for problems of asymmet
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Procurement process design One way
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however, financial deductions are m
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The Independent Monitoring Board at
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Figure 9.1: Difference between the
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‘While there were staff in the pu
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design the invitation to tender and
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and demand conditions. Second, we d
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DEMAND Anyone can apply to a local
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● Rent deposit guarantee by the l
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The Green Paper stated the Governme
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It was not an objective of ODPM or
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DESCRIPTION OF MARKET MECHANISM The
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Once the outcome is determined, fee
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DEVELOPMENTS OVER TIME The major mo
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Concerns about capacity constraints
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from those already located within t
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In several areas, registrations by
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Controlling for information problem
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extent though, it was competition b
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Section 10 - Choice-Based Letting i
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levels are reducing and new tenants
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desired effect of limiting points-c
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efficiency savings in some areas. T
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SECTION 11 Emissions Trading Introd
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Section 11 - Emissions Trading coex
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Section 11 - Emissions Trading emis
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A more detailed and diagrammatic de
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The costs of monitoring and reporti
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INITIAL ALLOCATION OF PROPERTY RIGH
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only 242 in the second year. The di
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COST-EFFICIENT EMISSIONS REDUCTIONS
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consultants to Defra of £11 per to
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Participation has helped us to rais
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Section 11 - Emissions Trading emis
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SECTION 12 Issues in the implementa
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