Promoting intermediate treatment: a problem of excess demand or excess supply?

Intermediate treatment (IT) has been offered and promoted as an alternative to residential care and, particularly, to custody for young people. Implicit in this promotion are two assumptions IT is cheaper than its alternatives, and this cheapness will bring about a shift in the balance of provision. These assumptions are examined. New evidence supports the first, but there is little reason to believe the second is currently true. The second assumption falters under conditions of both excess demand for IT and excess supply. The economic theme of these assumptions and problems is carried through to suggest some solutions to the problem of reducing the custodial population among young people. It is concluded that, barring the abolition of custodial sentences altogether, only radical shifts in funding and responsibility can alter the balance of provision.