Exclusive: Public money wasted as jails hampered by fixed contracts

As Whitehall begins to slash spending right across the public sector in the biggest cost-cutting drive since the Second World War, a scathing new report has revealed how the Government's centrally-agreed contracts for prison services are actually causing costs to spiral in many areas.

The independent monitoring board at HM Young Offenders Institute in Northallerton says catering staff have been banned from using money-saving initiatives, such as buying food close to its sell-by-date at cheaper prices, following the introduction of centralised contracts across the prisons network which mean long-standing deals with local suppliers can no longer be used.

The board describes the use of central contracts as "both inefficient and costly", citing further examples such as the awarding of prison shops contracts to a single firm nationwide, which led to "a significant rise in the operational charge" for HMP Northallerton.

"It's fair to say this sort of contract organisation doesn't always make for small local economies," said the board's vice-chairman, Valerie Hirst.

The board's annual review also says hours of valuable staff time are being wasted by centrally-imposed bureaucracy, meaning "staff time and energy is diverted from face-to-face work with offenders".

It criticises new computer systems and describes how tendering rules meant staff were forced to obtain three different quotations for the installation of a specialist TV channel, despite there being only one provider of the service in the entire country.

The monitoring report also makes clear that HMP Northallerton, which houses around 250 young offenders from across the north of England, can ill-afford the extra costs. Monitoring board members say they are "extremely concerned that Northallerton remains seriously under-funded" after being asked to find savings for six consecutive years.

It dates from 1783 and is in desperate need of refurbishment. There is no facility for outdoor sports and no dining room, meaning youths eat meals in their shared cells. Toilets in the shared cells have no screens, "raising serious issues of decency and hygiene".

The chances of renovation appear remote, however, with prison budgets being squeezed hard by the new coalition Government. The Ministry of Justice has already seen its budget slashed by 325m this year.

The situation is exacerbated by what the board calls the "sometimes bizarre situations" generated by central purchasing.

"Centralised contracts have proved to be both inefficient and costly," the report states. "One example concerns the new canteen (prison shop) contract, which was introduced at Northallerton in April 2009. This led to a significant rise in the operational charge to the contractor."

It adds: "The board regrets that the catering officer is no longer allowed to purchase food which is close to its sell-by date from the centralised contractors."

A prison service spokesperson declined to comment, saying only: "We look forward to reading the Independent Monitoring Board report on HMP Northallerton. The IMB will receive a full response in due course."