Jail contracting-out faces crucial test: An EC directive has upset the Home Office's preparations to privatise prison education. Donald MacLeod reports

THE PRIVATISATION of prison education in England and Wales has become a crucial test of the protection available to thousands of public service staff due to be transferred to the private sector.

Joan Ruddock, Labour spokeswoman for prisons, said yesterday that the 'cynical approach' adopted by Kenneth Clarke, Home Secretary, flouted the spirit of EC protection for public service workers. A Home Office letter to organisations tendering for prison education contracts, obtained by the Independent, indicates a very narrow interpretation of the regulations which, in practice, would remove pay and conditions protection for many of the 1,500 staff involved.

The Government's pounds 1bn programme of contracting out has been thrown into confusion by a European directive preventing private contractors from cutting the pay and conditions of existing staff and making them liable for redundancy payments. The Foreign Office last month suspended preparations to contract out services because of doubts over the impact of the directive, while the CBI said that there would no longer be any point in companies tendering for public services.

So anxious is the Government to reassure private contractors that the Home Office is now promising to renegotiate the price or terminate prison education contracts if its interpretation of the regulations is overturned.

Publicly, ministers accepted a judgment of the European Court of Justice in October that the directive did apply to British public service staff and the recently published Employment Bill will harmonise UK legislation with the EC Acquired Rights Directive.

Last week, however, the Home Office responded to approaches from worried tenderers by revealing counsel's advice that the directive would only apply if the new provider takes over the 'concrete physical elements of the operation, previously owned by the local education authority'. This is unlikely to apply in a prison.

The letter adds: 'The mere fact that . . . the new provider is 'taking over' provision of education does not establish that there is any relevant transfer from the LEA to that new provider for the purpose of the directive', and was not affected 'by the possibility that the new provider may decide to engage some of the staff previously employed by the LEA'.

However, the further education colleges now providing prison education are bound by the directive and must retain staff on their current pay and conditions when the service goes private in August next year.

Adam Sampson, of the Prison Reform Trust said: 'The effect of (the Government's) interpretation is to ensure that the private sector is put at an advantage over the existing providers.'