The number of criminals being sent back to prison for violating licence conditions has skyrocketed since the government’s “dangerous” part-privatisation of probation services, a watchdog has found.

The National Audit Office (NAO) said that while the 2014 Transforming Rehabilitation programme aimed to reduce reoffending and save money, the government has been forced to bail out failing companies and cancel contracts early in moves expected to cost taxpayers more than £467m.

Sir Amyas Morse, head of Whitehall’s spending watchdog, said the Ministry of Justice had “set itself up to fail” as Chris Grayling ignored warnings over contracting out the supervision of criminals.

“Its rushed roll-out created significant risks that it was unable to manage,” he added.

“These have had far-reaching consequences. Not only have these failings been extremely costly for taxpayers, but we have seen the number of people on short sentences recalled to prison skyrocket.”

UK prison conditions: in pictures Show all 8 1 /8 UK prison conditions: in pictures UK prison conditions: in pictures A cell covered in graffiti at HMP Liverpool. PA UK prison conditions: in pictures HMP Liverpool has some of the worst conditions inspectors have seen. HM Inspectorate of Prisons/PA UK prison conditions: in pictures A broken window in a cell at HMP Liverpool HM Inspectorate of Prisons/PA Wire UK prison conditions: in pictures A shower unit with protruding electric cable at HMP Liverpool HM Inspectorate of Prisons/PA UK prison conditions: in pictures Litter at HMP Liverpool HM Inspectorate of Prisons/PA Wire UK prison conditions: in pictures A wall damaged by damp at HMP Liverpool HM Inspectorate of Prisons/PA UK prison conditions: in pictures A pool table at HMP Liverpool HM Inspectorate of Prisons/PA UK prison conditions: in pictures A sign for HMP Liverpool, where drones are seized at a rate of more than one a week. The prisons watchdog flagged up the impact of the remote-controlled flying devices at HMP Liverpool. PA

The reforms created private Community Rehabilitation Companies (CRCs) to manage low or medium risk offenders and the National Probation Service (NPS) for those deemed more dangerous.

From 2015, every criminal released from prison became subject to statutory supervision, which had previously only been required for those serving over a year in jail.

The NAO’s report said that, between January 2015 and September 2018, the number of offenders recalled to prison for breaching their licence conditions increased by almost half from 4,240 to 6,240.

“Offenders serving short sentences often find it difficult to comply with license conditions and available supervision has not been appropriate to reflect the diverse needs of these people,” it said.

Over the same period, the percentage of offenders recalled to custody who had received sentences of less than 12 months increased from 3 per cent to over a third, amid a crisis seeing record violence and self-harm in overcrowded jails.

While the proportion of convicts who reoffend dropped by 2.5 per cent, the number of new offences per person rose by a fifth and just six of 21 CRCs consistently achieved significant reductions in reoffenders.

Meg Hillier MP, chair of the Public Accounts Committee, said the NPS had performed better but was being “hampered by a shortage of staff and intolerable workloads”.

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Peter Dawson, director of the Prison Reform Trust, said: “The so-called rehabilitation revolution has actually just put more people back into prison with damaging consequences.”

The NAO said “ineffective” contracts meant CRCs could not be held to account for poor services, as judges lost confidence in the community sentences they were supposed to enforce.

The government dramatically over-estimated how much work CRCs would take on, causing them to make huge losses under an “inappropriate” payment by results model.

By March 2018 the companies faced collective losses of £294m over the life of the contracts, compared to expected profits of £269m, and earlier this month a firm running three CRCs went into administration.

Terminating the contracts early will cost taxpayers at least £171m, the NAO said, and in total the Ministry of Justice is to pay “at least £467 million more than was required under the original contracts”.

Frances Crook, chief executive of the Howard League for Penal Reform, said: “Rather than helping to turn lives around, Transforming Rehabilitation has made communities less safe and cost the taxpayer a fortune. Everyone can see that it has failed, now we must seize this moment of opportunity to put things right.”

Richard Burgon, Labour’s shadow justice secretary, called it a “costly experiment that has failed to protect the public”.

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“Chris Grayling ignored all the warnings from Labour and others about the obvious dangers of privatising probation,” he added.

“The Conservatives now need to drop their dangerous obsession with running probation for private profit and instead bring it back in-house where it can focus on keeping the public safe.”

The damning report came after a watchdog revealed that CRCs were failing to enforce sentences, leaving convicts to commit more crime or simply disappear.

Sir Amyas said the proposals address some issues but “risks remain”, calling on the government to “pause and think carefully about its next steps so that it can get things right this time and improve the quality of probation services”.

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Rory Stewart, the prisons minister, said Transforming Rehabilitation was “good for public safety” because 40,000 more offenders were being monitored.

“The performance of the CRCs, which look after our lower risk offenders is too often deeply disappointing,” he added. “That is why we have stepped in to end contracts early and invested an extra £22m a year in services for offenders on release.