There has now been competition for prisons for a quarter of a century in England and Wales – and for a much shorter period in Scotland. Its evolution is summarised here, to give context for the analysis in later chapters, and to highlight how slow and haphazard the process has been, and how it has been shaped by wider influences and by changes in the way competition has been staged.

1992–97: establishing a viable market

When in 1992 Kenneth Clarke interviewed Derek Lewis to be the first Director General of HMPS appointed from outside the Civil Service, his only substantial question was what limits Lewis saw to the expansion of the private sector. Lewis replied that if privately run prisons could show good performance, none at all (Lewis, private communication). Clarke laid down no plan or timetable, and it was left to Lewis to devise a strategy: to create a viable private sector, it was necessary that at least four credible operators should between them run at least 12 prisons, holding about 10% of the prison population (Lewis, 1997). This programme – described as merely ‘an initial phase’ – was much slower paced than the private operators expected – G4 was said to be expecting 25% of prisons to be contracted out, of which they aimed for a minimum of ten. Lewis's strategy has in fact never been fully realised: by the time the private sector had 12 prisons running, there were only three operators left (see Chapter 6).

A key decision had already been taken: that the management of competitions and of contracts should be left with HMPS itself, despite the anomaly this created – that the organisation that would run competitions would also be a bidder in them (discussed in Chapter 6).

The Major administration developed three very different routes to achieve this strategy, which have been used ever since:

• • competitions to run new prisons already built by the public sector (‘management only contracts’);

• • competitions for existing prisons (‘market testing’);

• • competition to design, build, operate and finance new prisons under the Private Finance Initiative (PFI) (sometimes called Design, Construct, Manage and Finance, or DCMF, prisons, but here called PFI prisons).