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Prison capacity is being limited by union officers, Finance Minister Bill English said today after delivering a speech about using the private sector more.
Parliament is considering legislation to allow private operators to run prisons.
In a speech to the New Zealand Council for Infrastructure Development in Wellington this morning, Mr English said the Corrections Department was going to need to build more prisons and it was one of the first areas where public private partnerships could be used.
"We've asked Corrections to look at alternatives to conventional procurement for delivering extra capacity - including a new prison. We're happy to proceed with that if the case stacks up. We expect to be in a position to make decisions about that early next year."
Mr English told reporters the Government would only use private partnerships if that provided a better deal.
He was confident the public would not have a problem with the idea or other private provisions.
"I don't think it is a hard sell. I think people just want good services and they want them as soon as they can get them. And I don't think they are too concerned about how the machinery works."
Asked if the public were more comfortable with the idea of the private sector being involved in building structures rather than delivering services, Mr English hit out at members of the Corrections Association of New Zealand (Canz).
Canz is taking Corrections to the Employment Court arguing that the commissioning of double bunked prison cells breaches guards' collective agreement.
The prison muster is over 8000.
"I think the public would be more concerned about the current arrangements where effectively the Corrections union decides how many prisoners we are allowed to lock up after they've been sentenced," he said.
"That's quite unsatisfactory and I think the idea of private management of prisons is very well established around the world. Not a difficulty."
The committee considering the Corrections (Contract Management of Prisons Amendment) Bill has been told state prisons are cheaper to run and have had fewer escapes than Auckland Central Remand Prison did when run privately for five years.
"We'd only go down the private route if we thought we were going to get a more cost effective service," Mr English said.
"So over the next 12 months or so we'll get to see whether the publicly funded and run prisons can give us better management of the prisons and less escapes, if the other arrangements look like they will give us a worse service then we won't go with them.
"We don't need to do deals with the private sector. We'll only do them if they are going to give us a better service and better value."
Mr English said the Government would consider private providers in other areas.
Labour's law and order spokesman Clayton Cosgrove said the jury was still out on whether private prisons offered maximum value for taxpayers' money.
"International evidence is at best inconclusive in terms of value for money, at worst it suggests exactly the opposite," Mr Cosgrove said.
The previous experience with the privately run Auckland Remand Prison from 2000 to 2005 cost more to run than the state's equivalent.
In Britain, there had been calls for a rethink on the policy of private prison management.
Labour had built four prisons and a large remand centre while in government and National had failed to make any further progress.
"PPPs have to make sense and provide value for money. The issue is whether private prisons do either."