The Forensic Science Service (FSS) was an Executive agency which was granted trading fund status in 1999, a step designed to increase its financial flexibility. Then, following the McFarland review in 2002, FSS Ltd was established as a GovCo, wholly owned by the Government, in December 2005. The intention was that this be a transitional step towards a "public-private partnership".
In the event, however, no further progress was made. This lack of progress has led in our view to opportunities for reform being missed, and continuing reductions in the value of publicly owned assets.
The previous Government did not reform the Forensic Science Service when they had the chance, and instead allowed it to maintain a cost base far higher than its commercial rivals. This meant that FSS continued operating uncompetitive terms and conditions and expanded its employment levels between 1999 and 2003. This was undertaken without bringing down the cost base towards a level where FSS would be able to compete.
Commercial rivals, many established by former FSS members of staff, have taken market share from the former state-run monopoly.
FSS was set up as a GovCo, with an £18 million loan in December 2005. The company has met interest payments on this loan but cannot afford to repay the principal amount borrowed.
The previous Government supported the company with a further £50 million grant from early 2009 to restructure the business.
Despite this intervention and the commitment of the current management team, the current challenging forensics market has put the FSS back into serious financial difficulty. FSS is currently making operating losses of around £2 million per month. Its cash is due to run out as early as January next year. It is vital that we take clear and decisive action to sort this out.
The police have advised us that their spend on external forensic suppliers will continue to fall over the next few years, as forces seek to maximise efficiencies in this area. HMIC concurs with this assessment.
We have therefore decided to support the wind down of FSS, transferring or selling off as much of its operations as possible. We will work with FSS management and staff, ACPO, and other suppliers to ensure an orderly transition, but our firm ambition is that there will be no continuing state interest in a forensics provider by March 2012.
There is no justification for the uncertainty and costs of trying to restructure and retain the business.
We will ensure the orderly wind down of FSS does not impact on police service customers or the wider criminal justice system. With ACPO, we will put in place a central team to ensure work is transferred in a controlled way and that arrangements are put in place to ensure security of supply in future. The continued provision of effective forensics is our priority.
We know that there are real challenges ahead for FSS staff whose skills and contribution will be important as we move through the transition. We will be working hard with the company to ensure that staff are kept fully informed of developments.
We will also be working with ACPO to seek to maximise the level of competition in the market including through opportunities created by FSS leaving the field. This will help to ensure that police forces benefit from cost-effective use of forensics.
We want to see the UK forensic science industry operating as a genuine market, with private sector providers competing to provide innovative services at the lowest cost. This will preserve police resources and maximise the positive impact forensic sciences can have on tackling crime. A competitive market can help to drive down prices and improve turnaround times, meaning serious crimes can be cleared up more quickly and efficiently. Ultimately, that is what everyone in the criminal justice system wants to see.