web analytics

Rortwatch: closing prisons to justify Wiri

Written By: - Date published: 9:15 am, March 23rd, 2012 - 15 comments
Categories: capitalism, prisons, privatisation - 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?

15 comments on “Rortwatch: closing prisons to justify Wiri”

  1. Clashman 1

    Time to get the pitchforks out and head to Wellington, methinks.

  2. ghostwhowalksnz 2

    AS I pointed out before the ’empty prison beds’ you refer to is just a sleight of hand most of which is double bunking.

    And total prison numbers projected to fall ? They have NEVER been correct in any projection of prison numbers before. Why should they be suddenly have clear foresight now. And if you think falling crime numbers will be responsible, that is a political figure now which is massaged to give the result the politicians want.

    In New York city they have an emphasis on stats so you get crimes that are ‘armed robbery’ which become ‘lost property’ for statistical purposes. And if you are a serving policeman who becomes a whistleblower on the stats falsehoods, then you end up in a psychiatric hospital after a raid on your home by the equivalent of a police superintendent and a assistant commissioner
    http://www.nytimes.com/2012/03/09/nyregion/officer-sues-claiming-police-retaliation-for-truth-telling.html?

  3. (A different) Nick K 3

    Putting aside the economic argument (which itself stacks up against private prisions) there are certain functions that should always be the government’s responsibility and running prisons is clearly one of them.

    • tc 3.1

      Problem is that with the NACT ‘certain functions that should always be the government’s responsibility ‘ doesn’t fit in to their ideology so you can forget about them taking any responsibility.

  4. DH 4

    The big alarm with these PPPs is the finality of the contracts. The Audit Office advised that contracts of this type should not be longer than about 5yrs after auditing the Papakura Council water contract. It’s standard business practice to insert an escape clause in contracts of this nature. No-one signs up to an inescapable payout for 25-35yrs, it’s just not done.

    If Labour has any business nous they’d concentrate on the length of these PPP contracts and the inability of the Govt to end them. They should IMO be pushing for criminal investigations into every PPP contract that doesn’t have a reasonable escape clause. Keep it simple; if the contract can’t be broken then someone needs to go to jail for reckless incompetence or actual fraud.

    (any Govt contract with the private sector should be for no longer than 5-6yrs with right of renewal options)

    • Bored 4.1

      Could not agree more with where Labour needs to keep the pressure: limiting contracts to 5 years would have one salient benefit….the private sector would probably not invest. I base this observation on the cost of capital which tends to reward longer term “safe” contracts with lower interest rates. Most PPPs I have observed are highly marginal in terms of profit unless subsidised or offset against expected inflation effects.

      • DH 4.1.1

        I don’t think it would stop private investment, just establish a reasonable balance of the risk. With PPPs where the private sector is financing the building the contracts just need a 5-6yearly escape clause whereby the Govt can buy the prison or whatever at residual book value and end the contract.

        There is no commercial justification for unbreakable 25yr contracts, none whatsoever.

        • Bored 4.1.1.1

          Which sort of raises the question of why go private if the state can borrow at a lesser rate and does not have to receive minimized tax returns on any profits etc?

          • DH 4.1.1.1.1

            Yes it does raise questions. The fans of PPPs claim up to a 25% cost reduction which is really only the project management side of it; they reckon they can build the structures a bit cheaper. On the financial side a 25% saving doesn’t translate into any saving at all for the taxpayer because PPPs are essentiallly a mortgage and the interest rate from the private sector is a whole lot higher than what Govt can borrow for.

            The only real advantage from Govt perspective is it keeps debt off the books. The debt is still there but it’s not in the Crown accounts as debt.

  5. joe90 5

    Perhaps they’ve given their mates a guarantee that they’ll maintain a 90% occupancy rate for at least 20 years.

  6. Mount Crawford in Wellington is part of a Treaty settlement so we will see what they do with it.

  7. Draco T Bastard 7

    (you would never get it, they would claim commercial sensitivity – a nice fig leaf for National to hide its privatisation plans behind)

    An agreement with the government is an agreement with the people and thus the people have a right to see that agreement, what brought it about and the results of that agreement. Anything else is dictatorial oppression as it removes peoples freedom to govern themselves.

    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.

    Actually, it could easily cost more to upgrade the old prisons. A lot of them just won’t be up to modern earthquake standards and so the upgrade would be less cost effective than a new prison but the new prison should be in the same geographical area.

  8. yeshe 8

    These things I believe to be true .. currently at Mt Eden there is no chaplain or equivalent for any prisoner to talk with or receive counsel from; all numeracy and literacy classes, even those offered by outside volunteers have been stopped; inmates are kept locked up together in larger numbers for longer due to staff shortages … ah yes, the free market. And when I tell people here in Auckland that American Express is one of the biggest owners of prisons in the USA, they can scarce believe it. Mr Key must be in line for some very big payoff at the end of his great And rapid destruction of New Zealand’s way of being and living.

  9. weizguy 9

    I’m 100% in agreement on the issue of private prisons. However, I can advise that it is cheaper to build a new prison than it would be to upgrade the older prisons – Wellington Prison is in an awful state, New Plymouth isn’t much better, and the Waikeria ones are the worst of the lot.

  10. Campbell Larsen 10

    Three birds with one stone?

    Corrections $$$ for private prison operators, land opened up for developers and a new park for Sir Peters Mirimar studio. Nice.
    Who said the Nats weren’t generous? Know the right people and anything is possible.

    Sir Peter Jackson is reported to have advocated a public park on the land, which overlooks his Miramar-based film studio.

    Courtesy of a Stuff ‘consult the businessman’ patsy interview with the far from impartial Enterprise Miramar spokesman.

Recent Comments

Recent Posts

  • Select committee changes Kermadec/Rangitāhua Ocean Sanctuary Bill
    Photo by Tom Hitchon Parliament’s Local Government and Environment Committee has made many changes to the Kermadec/Rangitāhua Ocean Sanctuary Bill in response to public submissions, particularly submissions from iwi authorities and Te Ohu Kaimoana.   Read the amended Bill and the ...
    GreensBy Eugenie Sage
    23 hours ago
  • Housing map a hit as crisis spreads across NZ
    More than 55,000 New Zealanders have used Labour’s interactive housing map in its first week to see how the housing crisis is affecting their local community, Labour Housing spokesperson Phil Twyford says. “Our innovative map shows the housing crisis is ...
    2 days ago
  • Bridges must come clean about fraud within transport
    Hundreds of thousands of dollars of public money have gone missing and  the Minister of Transport, Simon Bridges must come clean after the Labour party revealed that a senior manager is being investigated for serious fraud, says Labour’s Transport Spokesperson ...
    3 days ago
  • Labour supports Spencer victory
    Labour congratulates Margaret Spencer for her tireless efforts in challenging the Government over family carer rights, says Labour’s Deputy Leader Annette King. ...
    3 days ago
  • US Warship visit welcomed by Labour
    Labour sees the United States warship visit as a red letter day for New Zealand’s non-nuclear status, which is core to our identity and has defined us a nation for 30 years, says Labour’s Deputy Leader Annette King. ...
    3 days ago
  • Time for honest dairy sector conversation
    ...
    3 days ago
  • What next? Dog kennels?
    Social Housing Minister Paula Bennett needs to explain why the Government thinks it is acceptable for it to refer families to live in garages and sheds, says Labour’s Housing spokesperson Phil Twyford. “This is a new low, just when you ...
    3 days ago
  • Banks bust a move, Government possum in the headlights
    Three of the big four banks have acted responsibly by bringing the shutters down on property speculators earlier than required by the Reserve Bank, says Labour’s housing spokesperson Phil Twyford. “It’s a shame the Government isn’t as motivated to act ...
    3 days ago
  • Latest OECD dairy forecast raises serious questions for economy
    The latest global dairy price forecast shows that New Zealand dairy farmers will not reach a break-even payout before 2019 at the earliest, and will not reach the dairy price factored into this year’s Budget until after 2025, Labour’s Finance spokesperson ...
    3 days ago
  • National’s reckless, out of touch approach to economy exposed
    Today’s economic assessment from the Reserve Bank highlights the danger to the New Zealand economy from a National government that is recklessly complacent in the face of a housing crisis and a struggling export sector, Labour’s Finance spokesperson Grant Robertson says. ...
    3 days ago
  • GP’s visits get more expensive
      Visiting the GP is set to become more expensive after the Government ignored warnings that people were not receiving access to affordable  healthcare, says Labour’s Health spokesperson Annette King.  “Over 400,000 New Zealanders who should be able to access ...
    5 days ago
  • Farm prices bear brunt of dairy downturn
    The slump in dairy prices that has seen farm prices drop to their lowest level since 2012 and down a third from their peak in 2014 will be of concern to farmers, banks and our overall financial stability, Labour’s Finance ...
    5 days ago
  • Reserve Bank “gets on with it”, National carries on in denial
    The proposal by the Reserve Bank to tighten loan to value ratios for investors shows they are prepared to do their bit to crack down on speculators, while National is still stuck in denial mode, Labour’s Finance spokesperson Grant Robertson says. ...
    5 days ago
  • Housing crisis holds up interest rate cuts
    The housing crisis that National still wants to deny is stifling the New Zealand economy, says Labour’s Finance Spokesperson Grant Robertson. “The latest Consumers Price Index shows that all prices excluding housing and household utilities decreased 0.5 per cent – ...
    6 days ago
  • Housing crisis holds up interest rate cuts
    The housing crisis that National still wants to deny is stifling the New Zealand economy, says Labour’s Finance Spokesperson Grant Robertson. “The latest Consumers Price Index shows that all prices excluding housing and household utilities decreased 0.5 per cent – ...
    6 days ago
  • Govt’s state house sell-off ramping up
    Government plans to ramp up the state house sell-off by selling another 1000 houses in 2016/17 will mean more families in need missing out, says Leader of the Opposition Andrew Little. “New figures show the Government plans to sell 1000 ...
    6 days ago
  • Govt’s state house sell-off ramping up
    Government plans to ramp up the state house sell-off by selling another 1000 houses in 2016/17 will mean more families in need missing out, says Leader of the Opposition Andrew Little. “New figures show the Government plans to sell 1000 ...
    6 days ago
  • National must reassure exporters on dumping case
        The National Government needs to show our key exporters that they are in control of any anti-dumping case against China before it damages some of our most important industries, Labour’s Finance spokesperson Grant Robertson says.     ...
    1 week ago
  • National must reassure exporters on dumping case
        The National Government needs to show our key exporters that they are in control of any anti-dumping case against China before it damages some of our most important industries, Labour’s Finance spokesperson Grant Robertson says.     ...
    1 week ago
  • Papers describe litany of incredulity
    Treasury documents which slate the Government’s plans for a national bowel screening programme confirm the proposal was nothing more than a political stunt to cover up underfunding of the health sector, Labour’s Health spokesperson Annette Kings says.  The papers were ...
    1 week ago
  • Effect of rampant house prices widens
    The latest house price figures from REINZ show the housing crisis expanding throughout the country, says Labour’s Housing spokesperson Phil Twyford. “We are seeing steep increases in median house prices in Central Otago Lakes – up 42.4% in the last ...
    1 week ago
  • Public invited to have say on homelessness
    People who are homeless, those who were once homeless, those working with the homeless and concerned New Zealanders are being asked to share their experiences and solutions to this growing issue with the Cross-Party Homelessness Inquiry. This inquiry was launched ...
    1 week ago
  • Sorry seems to be the hardest word
    An apology from Hekia Parata to the people of Christchurch is long overdue, Labour's Education spokesperson Chris Hipkins says. "As if the earthquakes weren't traumatic enough, Hekia Parata and the Ministry of Education then attacked the one thing that had ...
    1 week ago
  • Housing crisis affecting more than 98 per cent of NZ
    Labour’s new housing map shows the housing crisis is now affecting more than 98 per cent of New Zealand, Leader of the Opposition Andrew Little says. “Housing pressures have seen house prices rise faster than wages in all but four ...
    1 week ago
  • Uber might not be a taxi firm but it must pay tax
    Uber needs to explain how it paid only $9000 in tax when it earned $1m in revenue and is one of the fastest growing companies in the country, says Labour’s Finance spokesperson Grant Robertson. “Uber New Zealand appears to be ...
    2 weeks ago
  • Tax changes should have been made 3 years ago
    National could have avoided the international stain on our reputation from the Panama Papers if it had let IRD’s planned review of foreign trusts go ahead three years ago, instead of now belatedly acting because of the Shewan recommendations, says ...
    2 weeks ago
  • Government must stop state house sell-off
    The Government must immediately pull the plug on its planned sell-off of state houses in order to stop the housing crisis getting any worse, Labour’s Housing spokesperson Phil Twyford says. “While Paula Bennett is putting people into transit camps in ...
    2 weeks ago
  • Thoughts on Labour’s new housing policies
    The Labour Party launched its package of ideas to fix the housing crisis over the weekend. Their ideas match ours in many ways. This is good news, because it means that when we change the government we’ll be ready to ...
    GreensBy James Shaw
    2 weeks ago
  • Thoughts on Labour’s new housing policies
    The Labour Party launched its package of ideas to fix the housing crisis over the weekend. Their ideas match ours in many ways. This is good news, because it means that when we change the government we’ll be ready to ...
    GreensBy James Shaw
    2 weeks ago
  • Thoughts on Labour’s new housing policies
    The Labour Party launched its package of ideas to fix the housing crisis over the weekend. Their ideas match ours in many ways. This is good news, because it means that when we change the government we’ll be ready to ...
    GreensBy James Shaw
    2 weeks ago
  • Housing crisis drives household debt to record levels
    The Finance Minister must be woken from his slumber by Westpac’s report today that says house prices have largely driven household debt to record levels and are rising at a pace faster than other developed economies, says Labour’s Finance spokesperson ...
    2 weeks ago
  • English denies dividend decision made – Joyce should delete his account
    National must explain who is right in the Housing NZ dividend debacle, after Bill English said no decision had been made on a payment for the next two years, in direct contrast to Steven Joyce, says Labour’s Finance spokesperson Grant ...
    2 weeks ago
  • Pressure forces Govt to make policy on the hoof
    Steven Joyce’s surprise announcement that Housing NZ will no longer be used as a cash cow has forced the Finance Minister to make one of National’s biggest ever U-turns, Labour’s Finance spokesperson Grant Robertson says. “After years of insisting the ...
    2 weeks ago
  • 10-fold more affordable houses under Labour
    New data showing homeownership rates continue to fall and more Kiwis than ever rent, highlights why Labour’s plan to build 10 times more affordable housing in Auckland is so desperately needed, Labour’s Housing spokesperson Phil Twyford says. “Labour’s Affordable Housing ...
    2 weeks ago
  • Out of excuses, Brownlee resorts to scare tactics
    Gerry Brownlee’s ridiculous suggestion that Labour would nationalise Christchurch’s east frame shows National has resorted to scare tactics to hide its failure to build desperately needed affordable houses in our city, Labour's Canterbury spokesperson Megan Woods says. “Plans put in ...
    2 weeks ago
  • National all at sea in face of Labour’s housing plan
    Labour’s comprehensive plan to fix the housing crisis has left National Ministers flailing about, contradicting themselves and simply making things up, Labour’s Finance spokesperson Grant Robertson says. “Steven Joyce has said in one breath that Labour’s plan represents a minor tweak ...
    2 weeks ago
  • Labour’s comprehensive plan to tackle housing crisis
    The next Labour Government has a comprehensive plan to tackle the housing crisis by building affordable houses and cracking down on speculators, says Leader of the Opposition Andrew Little. “The housing crisis is out of control and National has proven ...
    2 weeks ago
  • Housing NZ to look after people, not profits
    Labour will change Housing NZ from a corporation to a public service and use the dividends it formerly paid into the Crown coffers to maintain and build more state houses, Leader of the Opposition Andrew Little says. “Housing NZ should ...
    2 weeks ago
  • Government breaks rent subsidies promise
    National has broken a promise to subsidise the rent of 3000 low-income New Zealanders to make up for its state house sell-off, Labour’s Housing spokesperson Phil Twyford says. “When John Key announced last year the Government would sell-off 8000 state ...
    2 weeks ago
  • Banks the latest to voice concerns over housing
    The Reserve Bank has revealed banks are becoming “more and more concerned” about the effects of the housing crisis, adding yet another weighty voice to the calls for action from the Government, says Labour’s Finance spokesperson Grant Robertson. “The Reserve ...
    2 weeks ago
  • New official figures show DHB’s financial strife
    New figures from the Ministry of Health show 12 out of 20 district health boards have not been fully funded this year to cope with the aging population, says Labour’s Health spokesperson Annette King.“The Ministry’s own figures to the Health ...
    2 weeks ago
  • Reserve Bank pleas for action from Government
    The Reserve Bank has stopped asking and is now pleading with the Government to take urgent action on the housing crisis, says Labour’s Finance spokesperson Grant Robertson. “Deputy Governor Grant Spencer is clearly deeply concerned about the housing crisis. The ...
    2 weeks ago
  • Labour to house 5100 more homeless a year
    There would be 1400 new emergency accommodation places – enough to put a roof over the heads of 5100 homeless people a year – under Labour’s emergency housing policy announced today, Opposition Leader Andrew Little says. “Too many of our ...
    2 weeks ago
  • Chilcot Report shows Labour was right on Iraq
    The Chilcot Report released today shows John Key was wrong to call New Zealand “MIA” over the 2003 war in Iraq and Labour made the right decision not to send troops, Leader of the Opposition Andrew Little says. “At the ...
    2 weeks ago
  • Bigger class sizes on the way under National
    Hekia Parata’s refusal to rule out bigger class sizes as a result of her new bulk funding regime speaks volumes about the real agenda behind her proposed changes, Labour’s Education spokesperson Chris Hipkins says. “Hekia Parata has proposed that schools ...
    3 weeks ago
  • National refuses to put people ahead of politics
    National’s refusal to rise above partisan politics and support a parliamentary inquiry into homelessness is hugely disappointing, Leader of the Opposition Andrew Little says. “This is such an important issue that politics should be put aside and parties should work ...
    3 weeks ago
  • Minister in denial over Pacific home ownership fall
    As long as the Minister of Pacific Peoples continues to deny that Pacific families have had the greatest home-ownership falls under his Government’s watch, nothing serious will be done to fix the housing crisis, says Pacific Island Affairs spokesperson Su’a ...
    3 weeks ago
  • Social Bonds experiment a failure
    The Government’s much vaunted social bonds experiment is a multi-million dollar failure, says Labour’s Health spokesperson Annette King.  “The news that the Wise Group has now withdrawn from the project to develop a pilot for mental health employment services, shows ...
    3 weeks ago
  • John Key must ‘get on with it’, not leave it to Reserve Bank
    John Key can’t just tell the Reserve Bank to ‘get on with’ fixing the housing crisis – he must act to tackle the rampant speculation in the housing market that has taken place under his watch, says Labour’s Finance spokesperson ...
    3 weeks ago
  • No gains for Māori while National in power
    The Minister of Māori Development needs to be honest with his people and admit his party’s ongoing support of the National Government has seen increasing inequality and decreasing prosperity for Māori, says Ikaroa-Rāwhiti MP Meka Whaitiri.  “Te Ururoa Flavell had ...
    3 weeks ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere