Written By: - Date published: 9:15 am, March 23rd, 2012 - 15 comments
Categories: Uncategorized - Tags:
1,200 prison beds, 1 in 8, are empty plus the 1,300 bed reserve. Prisoner numbers are projected to keep falling. So, why are the Nats spending a billion dollars on the Wiri private prison? And where will they get the prisoners? By closing existing public prisons. Rather than upgrading what we have more cheaply they’ll let a foreign company make a profit off locking people up.
This is part of the problem with private prisons. The prison owners have a profit motive to make sure they have enough prisoners. In the States, that often means they fund ‘tough on crime’ lobby groups (btw, how come Sensible Sentencing never releases a list of its major donors?). Here, it’s closing down existing private prisons. I would love to see the correspondence between the government and Serco over these prison closures (you would never get it, they would claim commercial sensitivity – a nice fig leaf for National to hide its privatisation plans behind).
And the government has an incentive to direct prisoners to private prisons, as well. Beyond the political motives of needing a full prison to show private prisons work there is a fiscal element. The old prisons’ capital value is long depreciated on the government’s books but it will be shelling out $300m to build this new prison and then be locked into paying for its $30m+ operating costs for 25 years. It makes more sense in the government’s accounts to keep the private prison well stocked, since it’s paying for it regardless, and stop using some old prisons that have a minimal cost associated with them if they sit empty. The alternative is to let the new prison sit empty, which is what happened with a lot of the public-private partnerships in the UK and those PPP ‘ghost roads’ in Australia, until the government realised the ‘solution’ was to cut public capacity.
Even Treasury sees that paying someone a profit for providing a service the government does on a non-profit basis just means more costs and being locked in for 25 years adds to the costs: “there is little reliable empirical evidence about the costs and benefits of PPPs” and that there “are other ways of obtaining private sector finance”, as well as that “the advantages of PPPs must be weighed against the contractual complexities and rigidities they entail”. Simply, government’s cost of capital is lower than the private sector’s – for that reason paying the private sector to provide a public good like prisons or electricity is always going to be more expensive. Unless you think there are ‘productivity fairies’ at the bottom of the garden that only the private sector knows about for some reason.
Of course, the more sensible thing is just not to build this white elephant prison in the first place. The old prisons need upgrades but its hard to see how that could cost as much as a new prison plus all the transition costs for prisoners and staff. And, by not signing into a quarter-century long deal with a profit-making entity, the government wouldn’t be locking us into a situation of having to pay for beds whether we need them or not so that some foreign shareholders can make a profit.
But can you see this privatisation-obsessed government taking the sensible option?