This week, Prime Minister John Key says that with the opening of the new privately run prison in South Auckland, it will be possible to close the Dickensian jails in Wellington, Invercargill and New Plymouth.

The reaction from Labour's justice spokesman, Charles Chauvel, highlights the strange attitude New Zealand politicians have towards incarcerating our fellow citizens.

You would have thought that Mr Chauvel would share the views expressed a year ago by Finance Minister Bill English, that prisons were "a moral and fiscal failure" and the fewer the better. Yet Mr Chauvel's reaction was that "prison closure will be a big blow to regional economies" and "job losses will be significant".

He wants the old ones rehabilitated.

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His concern for the economic impact on the local community reminded me of the lobbying local iwi engaged in a few years back when the new Ngawha prison was being planned. They wanted the right to run the place, drooling about the economic benefits that would flow to the tribe.

It was depressing reasoning then, and still is, that there was economic benefit to be had from running a prison which the statistics show, in the case of Maori, housed a disproportionate number of their own people.

Viewing prisons anywhere in the land as a valuable local economic resource is deeply twisted logic. A bit like those economic benefit reports issued after Volvo Ocean Race stop-overs and Rugby World Cups, to justify vast expenditures of public funds.

We spend more than $1 billion a year locking up 200 per 100,000 of our fellow citizens. A 2009 Treasury report noted that within the OECD, our incarceration figures were surpassed only by Mexico, the Czech Republic, Poland and the United States. We lock each other up at "significantly higher" rates than Australia, England, Ireland and Canada.

Treasury noted that in the previous decade, our incarceration rates had leapt from 150 per 100,000 to 195 per 100,000 and that "given that New Zealand's imprisonment rate is already one of the highest in the OECD and recent increases have had little impact on recorded crime rates, it is unlikely that further increases in our imprisonment rate will be the most cost effective way to achieve lower crime rates".

It concluded that "investing in reducing the number of people who enter the criminal justice system would likely provide better value for money - and better societal outcomes - than locking up more people".

A feeble gesture in that direction is contained within the Corrections Department's contract with Serco, the private operator to run the Wiri jail. The company will face financial penalties if it fails to meet short-term rehabilitation and reintegration goals. Corrections has a target of reducing recidivism by 10 per cent by 2020 in public prisons and expects private prisons to meet a 20 per cent target.

Prison reform campaigner and Wellington alcohol and drug counsellor Roger Brooking says that if we follow the example of Canada or Finland and took the issue seriously, we could quickly do much better than that and get our prison numbers down to more civilised levels.

In his book Flying Blind, published last year (flyingblind.co.nz), he argues deterrence doesn't work. "Over half of those who have been to prison keep going back."

He says 43 per cent of all prisoners and 65 per cent of those under 20, reoffend within a year of their release. "Currently about a quarter of prison inmates are sent back to prison within 12 months of release [and] after five years, over half will have been back. For those under the age of 20, more than 70 per cent are back in prison within five years."

Mr Brooking says despite 80 per cent of all crime being alcohol or drug related, judges rarely order offenders to undergo treatment. He notes that even with drink driving offenders - two thirds of whom have a clinically diagnosable "drinking problem", only five per cent are required to even attend an assessment.

Just as well perhaps, because there's a serious shortage of both assessment and treatment facilities.

In 2009, around 100,000 people convicted of criminal offending "were affected by alcohol and drugs at the the time of their crimes", yet only 6321 were ordered by the judge to attend a substance-abuse programme as part of their sentence.

He also highlights the success of Canada's programme to reintegrate ex-prisoners back into society. In Canada, only 25 per cent of inmates return to federal prison within 10 years of release compared with more than 50 per cent in New Zealand within five years. A key difference, in Canada, 60 per cent of prisoners are released into halfway houses funded by the Corrections Service. The rest are released to family or other supervised living arrangements.

The facilities provide 24-hour supervision, comprehensive rehabilitation programmes and most offer substance abuse treatment.

New Zealand Parole Board chairman Judge David Carruthers returned from a trip in 2008 to praise Canada for being five or six times more successful in reducing re-offending because of the halfway houses. Yet New Zealand has just two such facilities with a total of just 28 beds.

Finland has a similar success story.

Yet our politicians, from both sides of the ideological divide, continue to follow the bray of the "lock'em up" lobby. Despite the manifest failure increased incarceration has on crime rates, or recidivism, we keep building prisons and throwing people inside.