Thursday, April 15, 2010

More evidence that private prisons are a scam

Yesterday, the government announced plans to tender for a private company to build a new private prison in South Auckland. The government's argument for this is that private prisons are cheaper. Today, the Herald reports a new study of Florida's private prisons has found no evidence that that is the case.

The actual report - Are Florida's Private Prisons Keeping Their Promises? by the Florida Centre for Fiscal and Economic Policy - is here [PDF]. It notes that while there is a difference in headline annual incarceration costs - $17,216 for a private prison vs $18,980 for a public facility - this cost is largely the result of private prisons being newer and handling lower-security inmates. If the government built a new low-security prison, it would receive those "savings" too. Beyond that, it finds that the procurement process means that it is very difficult to determine what, if any, savings are being delivered; there are no actual costs computed for parts of the public system, so they just can't tell if the legally required 7% saving is being delivered or not.

In addition to that, the report finds no evidence that private prisons reduce recidivism. According to a 2003 report from the Florida Department of Corrections, there were "no statistically significant differences in recidivism rates were found between public and private inmate groups" and "no empirical justification for the policy argument that private prisons reduce recidivism better than public prisons". So much for the government's second argument.

These findings are consistent with those for PPP projects in general. The CTU yesterday highlighted a study by the Independent in the UK, which found that the UK government was massively overpaying for assets through the Public Finance Initiative, paying £262 billion for assets with a capital value of only £55 billion. PFI investors are making out like bandits, making huge (17 to 23 percent) rates of return, by funding projects which could have been built cheaper with public money. Rather than saving money, PPPs are simply wasteful exercises in corporate welfare, another way of looting the state and transferring wealth from the many to the few. And rather than expanding such arrangements to schools and hospitals, we should be banning them - because in every case, the public is the loser.