Private security giants G4S and Serco are to be stripped of all responsibilities for electronically tagging criminals following an overcharging scandal.
Electronic monitoring contracts will be handed over to rival firm Capita on an interim basis at the end of the financial year, Justice Secretary Chris Grayling said.
Capita is in the running to take on the contracts permanently.
Security firms G4S and Serco have apologised for overcharging the Government by millions of pounds on contracts for tagging criminals.
The Serious Fraud Office (SFO) has opened a criminal investigation after it emerged G4S and Serco overcharged the Government for tagging offenders, some of whom were found to be dead, back in prison or overseas.
G4S chief executive Ashley Almanza admitted the company failed to "tell the difference between right and wrong" when dealing with its electronic monitoring contracts and apologised to the taxpayer.
The chairman of Serco told MPs that it was "ethically wrong" that his company also overcharged the Ministry of Justice.
Yesterday, the Government rejected a £24 million offer from G4S to settle the row with officials vowing to "pursue all possible avenues" to recoup more taxpayers' cash.
Taxpayers will get "a refund" on the £24 million G4S wrongly charged the Government for monitoring offenders, according to the Ministry of Justice (MoJ).
An MoJ spokesman said it was still working with the firms and the independent auditors to work out "what the final sum will be".
The head of G4S is due to appear in front of MPs at the public accounts committee later today:
The Secretary of State has been clear: we are determined to secure a refund for the taxpayer.We have taken appropriate legal advice and will pursue all possible avenues. This matter is now the subject of a criminal investigation.
We are not able to comment further at the current time. We will make a further statement when it is appropriate to do so.
A private security firm raked in almost £16,000 for a monitoring system that was not even installed, accountants found.
A £2 million audit into the private security firms the Government uses found:
- Serco charged and received £15,500 for an uninstalled monitoring unit for nearly five years.
- G4S netted nearly £4,700 over a three year period for a botched monitoring job.
- Serco billed the MoJ on four separate occasions for the same tag as the offender was under multiple supervision orders.
- There was no evidence G4S had overcharged on any other public service contracts.
MPs are preparing to grill the group chief executive of G4S over the £24 million they admitted overcharging the Ministry of Justice (MoJ) for electronic monitoring of offenders.
G4S and fellow contractor Serco are the subject of a criminal investigation by the Serious Fraud Office (SFO) over the way they operated the contracts.
The Government rejected the private security firm's offer to repay the £24 million yesterday as officials vowed to "pursue all possible avenues" to recoup taxpayer cash.
G4S chief Ashley Almanza said the offer was "an important step in setting this matter straight" and restoring trust.
The Government has rejected an offer from security firm G4S to repay the £24m it owes for overcharging in credit notes.
Officials turned down the settlement and say they will "pursue all possible avenues" to recoup more taxpayers' money.
A Ministry of Justice spokesman said it was still working with the firms and the independent auditors to work out "what the final sum will be".
"The Secretary of State has been clear: we are determined to secure a refund for the taxpayer.
"We have taken appropriate legal advice and will pursue all possible avenues."
Security firm G4S has apologised for overcharging the Government for its provision of electronic tagging services, calling its actions "unacceptable".
The group's chief executive Ashley Almanza said:
The way in which this contract was managed was not consistent with our values or our approach to dealing with customers.
Simply put, it was unacceptable and we have apologised to the Ministry of Justice.
We remain committed to working with the Ministry and the UK Government to resolve this matter and to provide enhanced oversight of service delivery and contract performance.
G4S said it will give credit notes worth £24.1 million to the Government after an independent review found the security firm had overcharged for its electronic tagging contracts.
The firm said the review of the contract showed that its justice division had "wrongly considered itself to be contractually entitled" to bill the Government, but stressed there was no evidence of dishonesty or criminal conduct.
Electronic tagging contracts run by G4S and rival firm Serco are currently under a criminal investigation by the Serious Fraud Office.
G4S has admitted it wrongly billed the Government for the provision of electronic monitoring, or tagging, services, and said it will pay back £24.1 million.
A criminal investigation has been opened into government electronic tagging contracts held with Serco, as well as G4S, the Serious Fraud Office (SFO) said.
An audit by accountancy firm PricewaterhouseCoopers, launched in May, alleged that overcharging began at least as far back as the start of the current contracts in 2005 but could have dated back to 1999.
Justice Secretary Chris Grayling told the two firms that an independent forensic audit was required to look at internal email trails between executives to establish what happened. While Serco agreed to take part, G4S refused.
Serco allowed a further forensic audit to take place but G4S refused to co-operate and were reported to the SFO.