On The Nation:
Lisa Owen interviews Corrections Minister Sam Lotu-Iiga

Corrections Minister doesn’t know how much prisoners getting paid for work in new private prison or if anyone is making a profit from the products made

“But what I’m saying is that it’s a benefit, not just to PlaceMakers, not just to those that are wanting houses in Auckland, but also to offenders, who are going to go out and get jobs.”

Admits person employed to monitor Serco’s performance in prison is paid by Serco

“Owen: But they’re actually employed by the people who run the prison.
Lotu-Iiga: They’re employed by Serco, but they are reporting back to, as I’ve just said, someone in the Department of Corrections."

Says new prison will save taxpayers over $180 million in the long-run, but denies Serco will be making $30 million a year from it despite Serco media release saying it will make revenue of $30 million annually

Minister has “full confidence” in Serco despite series of botched contracts overseas, “based on what they’ve done in New Zealand”

“But they’ve made mistakes, and that’s certainly not for me to answer to Serco’s track record in the United Kingdom”

Serco is “performing exceptionally” despite Mt Eden Remand Prison having the highest rate of prisoner-on-prisoner assaults in the country; says it’s a “high risk environment”.

Says the prison will have to reduce recidivism rates by 10% more than the public prison target of 25%.

Says computers and phones in the new prison’s cells will help prisoners learn new skills and maintain contact with family and will be recorded.

Lisa Owen: Corrections Minister Sam Lotu-Iiga is here in the studio. Good morning to you, Minister.
Sam Lotu-Iiga: Good morning. Good morning to our viewers.
So why is this prison being run privately?
Well, a tender was put out to run the prison, and Serco won that tender with their bid. You know, we’re looking at different ways to improve government services in the prison system. We know that in health and education and other social services that, you know, you can have private providers that do as good a job as the public sector. We think that the long-term performance of the Corrections system will be helped by having both private and public providers, and that’s what we’ve got in place now.
So how is everyday life in the prison going to be different, then?
Well, it’s about providing a different way of providing services. If you look at the way that Serco have operated at Mount Eden, they’re the best performing prison according to the performance table. They look at ways of using innovation through technology, you know, audio-visual links, for example, in health care. So they are, you know, leading innovation. And in terms of the Corrections Department, they can actually— as part of the contract, they can actually take some of the innovations and help improve the public system. But my expectation is that they will work together to better promote government services and Corrections.
But what are the innovations there that are going to be different from other prisons that Serco is going to bring to the table?
Well, they are doing things in the work space, for example. They’ve got a number of employment opportunities that they’re setting up with, for example, PlaceMakers. PlaceMakers will make an investment in the site. They will be providing house frames for these workers to gain skills and technical training and get jobs, but the great thing is they’re providing jobs outside of prison to go to, you know, help with the housing shortage in Auckland.
So inmates will be building house frames in conjunction with PlaceMakers?
Yeah, that’s right.
Yeah, so who—?
And gaining the skills to do— you know, in the trades and in technical areas around construction.
So are they getting paid and how much?
Well, the contract is between Serco and PlaceMakers, and I’m not privy to those sums, but—
So you don’t know how much the business is going to make—
I don’t have the figures on me, but we could ask Serco what the contract’s for. But what I do know is that if these workers are trained and get the skills to go out and get meaningful employment, that reduces reoffending, and that’s one of the big goals, big public-service targets for our government.
And we’ll talk about that later, but who is making the profit out of this?
Out of?
Out of the inmates building framing and having these contracts. So who makes the profit out of the contract?
Well, we don’t know whether there’s profits being made, but what PlaceMakers—
But why—?
Hang on—
Why don’t you know that, Minister? Because this is under your watch.
Well, I spoke to the managing director of PlaceMakers yesterday, and they said that they will pay a standard contract for fees to Serco. I don’t know what that amount is, but what I do know – the big gain here is that they are not— this is over and above the investments that PlaceMakers are making. They see the public good in making an investment into a prison system so that workers— that offenders can go on and gain skills and add to the industry. We are crying out for more skilled labour and construction. This is only a positive and not a negative, in my view.
Right, so in terms of rehabilitation, but you don’t know who’s making a profit or if one’s being made?
Well, they’ve got a—
No?
Hang on. They’ve got a commercial transaction between Serco and PlaceMakers. I don’t know what that figure is, but we can work it out. But what I’m saying is that it’s a benefit, not just to PlaceMakers, not just to those that are wanting houses in Auckland, but also to offenders, who are going to go out and get jobs.
Okay, well, other things that they're doing there — phones in cells, isn't it? Phones in cells? Computers in cells? There's basketball courts out there? Why all that stuff?
Well, computers in prisons are not new. They're in our public prisons.
But phones are. Phones are new.
If we can just talk about computers. So computers are an education tool. They're an education aid. They help with building up the skills, building up the education in order for these offenders to go out and get meaningful jobs. We know that's important.
So what's the benefit of the phones?
Can I come to the phones?
Yeah.
So in terms of phones in cells, at very little, you know, cost to Serco, what it does is it... You know, there's a de-escalation of tension. They're not lining up behind a public phone in order to use a phone to call their families. Having phones to call their families is really important because it helps in their re-integration back into society. But, also, they can use the phones as a communication tool between corrections officers and the offenders.
You'd appreciate that some people would be concerned that they're going to conduct their illegal businesses over the phone as well?
Well, no, because all the phone calls that are made are screened, just like they are at public prisons.
No, at public prison, a percentage is screened.
Well, they're screened, and they're recorded. So, you know, in the same way that we have rules for public prisons, there are similar rules for the communication into these private prisons.
So all recorded. They're not all screened? They're not all screened?
They're recorded. Yes, they are recorded, and some of them are screened. No, they're not, but that's the same... It's the same rules in public prisons as they are in private prisons. So there's no distinct advantage there for Serco.
Okay, so it's a 25-year contract, and Serco has publicly said it'll make about $30 million a year. So why don't you, the Government, do the job yourself and invest that money somewhere else? Because Bill English could probably do a bit more in the pot.
Well, as I said, actually there is a saving to the taxpayer. For a similar prison, we are actually saving, in the long run, over $180 million.
Even with that $30 million? Even with that $30 million profit that they're making per annum?
I don't think they're making a $30 million profit. I think its cost, the contract, over 25 years is $30 million for this particular prison. I think you're talking about Mount Eden as a whole.
That was their notification to the stock exchange.
Well, as far as I know, it's a $840 million contract over 25 years, and if you do the numbers there, we know what the figures are. But, look, what it is is a saving to the public. They are also subject to stringent financial conditions around rehabilitation.
You don't think it'll make $30 million, and what you're saying is it's still saving money even though this company is making a profit out of it? It's still saving us money even though they're taking that profit.
It's... Well, it's saving the taxpayer money. It is saving the taxpayer money.
How much do you think they are going to make out of it a year?
Well, I've said the contract is worth $840 million over 25 years. What I'm saying is it's saving the public over $180 million, and that's got to be a positive thing. That means, you know, as the Finance Minister's just said, you know, we're tight on our finances. We are looking for ways to more effectively use taxpayers' money, and I think that's what New Zealanders expect.
Okay, well, this company, Serco, had to pay back more than £60 million to the UK government after it charged for services that it wasn't delivering. In fact, some of the prisoners that it was supposed to be engaging with in these services were actually dead. Can we trust this company?
Look, what I can say is that they made a bid in a tender — in a highly scrutinised tender — and they won that bid. Their performance in New Zealand has been exceptional.
We'll come to that in a minute, Minister, but I'm asking you — can you trust this company?
Well, what I'm— Look, what I'm saying—
Given its track record, can you trust them?
What I’m saying is that I’m judging them on their performance in New Zealand. I’m judging them on their performance to provide—
Why only in New Zealand, Minister? This is really important. People will want to know this, because it’s an enormous contract.
They’re providing Corrections facilities in New Zealand. The evidence I’ve seen is that they’re performing exceptionally. We’ve got to judge them on their performance here. But they’ve made mistakes, and that’s certainly not for me to answer to Serco’s track record in the United Kingdom. They’re performing well here, and my expectations under the agreement is that they will perform, or there will be financial penalties.
So 100% confidence in them, or what level confidence?
I’ve got confidence—
100% confidence?
Based on what they’ve done in New Zealand, I’ve got confidence that they will fulfil the requirements of that contract, and if they don’t, there will be serious financial penalties involved.
So you can’t tell me that a company that’s going to be responsible for a quarter of our prison population, you cannot express 100% confidence in?
I’m expressing full confidence that they will perform the contract according to what they’ve signed up to. There are— look, if they exceed their targets on the contract, they will actually get financial bonuses, because they will be reducing reoffending.
How much? How much can they make in bonuses?
Well, they could make up $1.5 million if they, for example, exceed the rehabilitation targets, reoffending targets by more than 10% compared to the Corrections Department. They could get up to over $1 million. That is money that’s returned to the taxpayer, because if we’re reducing reoffending, we can use that money on other government services.
Okay, well, who’s monitoring their performance? Who makes sure that they reach their targets and that they’re assessing themselves fairly?
Okay, they are actually more scrutinised than any public prison. They’ve got two monitors— there will be two prison monitors in each of the prisons.
Who employs those monitors? Who employs the monitor in the prison?
There will be— If I can just finish, there will be an ombudsman. They will be subject to complaints—
So the monitor in the prison, Minister, just to be clear, the monitor in the prison; who employs the monitor?
My understand is that the monitors are based in the prisons, but they report to the Department of Corrections.
Who employs the monitor and pays their wages, Minister?
Well, I don’t have those facts on me, but they do report—
Well, I do. The person who employs the monitor— the person who employs the monitor is the company, Serco. They employ the monitor, and pay their wages.
Okay, can I just finish—
So how is that an independent analysis?
Well, they’re reporting to the Department of Corrections. We have the ombudsman as well. We have the chief inspectorate, if I can say, the chief inspectorate is based in the Department of Corrections. They will be also subject to the scrutiny and the questioning and the examination through the chief inspectorate. That is no different, can I say, to any other prison.
But you’ve just told me that they’re going to have a higher level of assessment monitoring—
Well, they do.
—by saying that they’ve got this person in the prison. But they’re actually employed by the people who run the prison.
They’re employed by Serco, but they are reporting back to, as I’ve just said, someone in the Department of Corrections. So they’ve got not only two monitors, they’ve got the ombudsman, they’ve got the chief inspectorate and also the office of the Auditor General. That’s no different to any other prison in this country.
Okay, well, you’re saying that you want to lower recidivism rates by 25% by 2017. Your predecessor said that private prisons have to operate 10% better than the public. So are you asking them to lower rates by 35%?
No, we’re—
No?
If you let me finish, we’re asking them if they can perform up to that level, they will get financial bonuses if they can exceed the target, if they can perform at a level which leads to drastic reductions in reoffending. Look, it costs $105,000 to imprison one person in this country.
Minister, I just want to be on this, so you—
If I can just finish—
No, no, I want to be clear about this, Minister. 25%,
Yes.
Your predecessor said the private prison has to do 10% better, but you’ve just told me you’re not asking them to reduce recidivism by— 35% is not a target for them.
Well, I’m asking them to perform at a rate that exceeds the Department of Corrections, and they will—
So you haven’t set 35% reduction as a target?
We’ve set a target which is to bring down reoffending over time—
But not 35? But not 35% reduction?
Well, it’s an excess of 25%. We’ve asked them 10% more, and that’s what they’ll have to demand.
So not 35%? I just want to raise with you the Mt Eden facility, which you’re using as an example of how well Serco is doing. Don’t they have the highest assault rates, and haven’t they had the highest assault rates for the past three years, Minister? In all the prisons?
Well, no, in terms of the—
Haven’t they?
No. What we have is the way—
Prisoner-on-prisoner assaults in the last three years—
In terms of internal procedures, in terms of core security, they have a high-risk prison. Now, the way performance tables are drawn up in terms of the risk, it’s adjusted for the risk of each of the prisons—
So on the numbers, Minister, the last three years of numbers for assault rates, does Mt Eden have the highest assault rates, prisoner on prisoner for the past three years?
Well, they have high assault rates, but what I’m saying—
But they still managed to get to the top of the table?
They are, because they are— the nature of a remand prison, where there are numerous amounts of prison movements a day, is that it’s a high-risk environment. They may have the highest number of assault rates, but they are the highest-performing prison in this country, based on core security, based on recidivism rates and a whole range of other measures.
So you’ve got absolute faith in them, given that record?
I’ve got faith that they have a contract before them. They must meet the terms of that contract, and based on their record in Mt Eden in the last couple of years, I think they’ve done a very good job.
All right. Thank you very much for joining me, Minister.
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