The Government has given the green light for a new privately-run prison in South Auckland, to be run by the same company that manages Mt Eden Prison and was recently fined $150,000 for an escaped prisoner.

Wiri Prison will be a 960-bed prison and will open in 2015.

The consortium to build and run the prison will include Serco, which manages Mt Eden Prison.

For Wiri, Serco will face stiff financial penalties if it does not meet rehabilitation targets - which will be set at 10 per cent lower than public prisons.

The Corrections Department has a target to reduce re-offending by 10 per cent. If that is achieved, Wiri would have to achieve a rate 20 below the current rates or face fines, which have yet to be set.


The cost of Wiri prison will be capped at $900 million, including capital and operating costs over the 25-year contract.

Finance Minister Bill English said he was confident that the prison would cost 10 per cent less than a public prison, and perform better than the public sector.

He said the Government considered shelving the prison altogether, given the financial climate and because the forecast for the prison muster for 2016 has dropped by about 3000 in the past three years.

But other factors in the decision were the age of older prisons including Mt Crawford, and the earthquake assessment work being done on all prisons including the ones in Canterbury.

However Mr English said he believed Wiri, to be built by Fletcher Construction, would be the last prison that the Government needed to build.

"This is an important milestone for one of the first major PPP projects in New Zealand," Mr English said.

"We are confident the new prison will reduce reoffending, improve public safety and help improve performance across the entire prison system.

"The contract will have strong performance incentives, ensuring we receive a superior service compared to publicly run prisons or we pay a lower price."

Corrections Minister Anne Tolley said Corrections was looking at closing Mt Crawford Prison.