Government hands private prison management deal to G4S

LONDON Thu Mar 31, 2011 5:08pm BST

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LONDON (Reuters) - The government handed the running of an existing state-run jail to private managers for the first time on Thursday and said it was ready to use troops to keep order if prison officers strike over the deal with G4S.

Justice Secretary Ken Clarke said the government had appointed G4S to manage Birmingham prison as well as a new jail, Featherstone 2, being built in nearby Wolverhampton.

G4S said both contracts were for 15 years each, with an estimated total value of around 750 million pounds for the life of the deals.

Outsourcing group Serco was also awarded a fresh contract to run Doncaster prison, where its contract was due to expire. Serco said the deal was worth around 250 million pounds over 15 years.

Birmingham will be the first ever transfer in Britain of the management of a state-run prison to the private sector. Other existing privately run prisons such as Doncaster are recently built institutions always run by private companies.

The union representing 550 prison officers at Birmingham said it was considering taking industrial action over the deal.

"We are currently assessing our position with our membership and we are ruling nothing in and nothing out," said Colin Moses, national chairman of the Prison Officers Association.

Clarke said the government was ready to use troops to keep order in jails should prison officers go on strike.

"No one is contemplating a military takeover of a prison, the governor will still be in charge and so will the prison service, but it is only prudent to make sure that we do have the military prepared should it be required."

Prison officers are barred from taking industrial action but Moses said his union was prepared to ignore the law if their members decided to take action.

Analysts at JP Morgan said Clarke's determined stance could be good news for outsourcers.

"Clarke's determination to use the military to push through privatisation is perhaps evidence of the government's determination to take on public sector unions, which may be a positive sign for the outsourcing trend," analysts wrote in a note.

The Ministry of Justice said the outsourcing of the management of the three prisons would save 216 million pounds over the lifetime of the contracts.

Featherstone will be operated by G4S but will remain under prison service control.

Serco's Doncaster deal will include a trial of the government's Payment by Results (PBR) initiative, which means that 10 per cent of the contract price will only be payable if the company reduces reoffending rates.

Shares in G4S on the London Stock Exchange were down 0.23 percent at 1559 GMT. Serco was down 1.33 percent.

(Editing by David Cowell)

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