Government plans to privatise three prisons have been ended after outsourcing group Serco, who had been positioned as the leading bidder, faces criminal investigation for fraud.

With the termination of the privatisation plans, the three prisons will now be run by HM Prison Service.

Serco along with G4S are facing investigation for fraudulent behaviour for overcharging on tagging contracts. Serco moved to cooperate with the Serious Fraud Office investigation but its on-going nature have resulted in termination of the prison programme.

The Lord Chancellor and secretary of state for justice, Chris Grayling, who revealed the details of the audit which showed overcharging, said: “The investigations remain ongoing. The impact of the delay and the uncertainty this had created mean that for operational reasons we cannot postpone the outcome of the competition process any further. I have therefore decided that the competition for these prisons will cease and that all three prisons will be managed by HM Prison Service.”

Serious Fraud Office to investigate Serco and G4S