G4S in the running to take control of privatised probation

Chris Grayling, the Justice Secretary, also said yesterday that paedophiles could be forced to wear GPS tags alerting police to their location after their release (PA)

Large companies such as G4S and Serco will win the lion's share of contracts to run probation services, unions forecast last night after David Cameron announced a drive to slash levels of reoffending by hardened criminals.

Under the Government's plans, private firms, charities and voluntary organisations will be given the task of rehabilitating offenders, and will be paid according to their success.

The Prime Minister set out proposals for a "tough but intelligent" criminal-justice policy designed both to make the system more punitive and to break the cycle of reoffending. Six out of 10 people who leave prison are reconvicted within two years.

He struck a more hardline note on the issue than in previous speeches, insisting he wanted "tougher" sentences, announcing stronger sentences for knife possession, and promising swifter justice, as happened after last year's riots. He also signalled that he was prepared to see the prison population rise if necessary.

Chris Grayling, the Justice Secretary, pictured, also said yesterday that paedophiles could be forced to wear GPS tags alerting police to their location after their release.

A key element in the plan to tackle reoffending is to run rehabilitation programmes with almost all inmates, including those on sentences of less than one year, by 2015. At the moment, only people jailed for more than a year are offered rehabilitation.

The National Association of Probation Officers (Napo) predicted that most probation services that are outsourced would go to large companies rather than charities or voluntary groups.

Bidders are likely to include such firms as G4S, Serco and Sodexo, which run England's 14 private prisons. Downing Street yesterday insisted the scheme would be designed in such a way as to enable charities to partake.

But Harry Fletcher, the Napo assistant secretary, said: "It's a certainty that large security companies will win virtually all the contracts. It is they who can afford to subsidise bids under a payment-by-results system.

"Charities that can't afford to bid will go out of business and standards will fall."

Penal reformers warned that Mr Cameron's determination to improve rehabilitation standards ran counter to the squeeze on spending in Whitehall, including the Ministry of Justice. The Prime Minister acknowledged the problem, but said ministers and prison chiefs had to "do more for less".