Having thrown Shane Jones the $1 billion regional development bone to happily gnaw at over the summer months, it's now time for Prime Minister Jacinda Ardern to call her New Zealand First coalition partners to heel and seek a big favour.

As Budget horse-trading reaches a climax, Labour has to decide whether to stick to its election promise to scrap National's proposed $1.5b, 3000-bed super prison at Waikeria in Waikato.

With only 300 beds still empty in the existing system, Labour needs New Zealand First support to reform the harsh laws governing bail and parole which have helped trigger the prison population explosion.

Over the past 25 years, a wave of "penal populism" has caused New Zealand's prisons to burst at the seams despite a steady fall in the crime rate. Our current incarceration rate of 220 per 100,000 population is equivalent to places like Gabon and Namibia, rather than places we like to compare ourselves with, like Sweden on 66 and Germany on 83.

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In 1995, the New Zealand prison muster totalled 4445. By last September's election it was 10,470. This included 2987 remand prisoners, locked up before being found guilty - or innocent - thanks to the agitation of the law and order mob. The latest grand total is 10,695.

Over the same period, crime rates plunged. In 1996 the police recorded 477,596 offences. By 2014 the figure was down to 350,389, despite the population having grown from 3.7 million to 4.5 million. The latest police statistics have the number at 267,465 for the year ending 31 December 2017, "a decrease of 1 per cent over the previous 12 months".

And who are we incarcerating in ever growing numbers? A June 2016 research paper by the Department of Corrections reads like a census of hospital patients. Of 1200 prisoners interviewed in mid-2015, 62 per cent had either a mental health or substance uses disorder - 20 per cent suffered from both. Less than half had received any form of treatment.

A "significant minority (7 per cent)" had psychotic symptoms and almost a quarter suffered from depression or other form of mood disorder. A similar number suffered from anxiety disorders such as panic or post-traumatic stress. Six per cent had attempted suicide. There's also the long unaddressed disgrace that 50.9 per cent of prisoners are Maori.

At the last election Labour promised a "prevention-first approach to crime", pledging to reduce the prison population by 30 per cent over 15 years. "Too often [prisons] have become dumping grounds for people who need treatment more than ... punishment."

Last week, a report from the office of the Prime Minister's Chief Science Adviser, written by Associate Professor Ian Lambie, provided a valuable under-pinning for Labour's policy. Addressing "the value of data rather than dogma and belief" in building a better justice system, Lambie pointed to the experience of countries with low prison populations like Sweden, Norway and Finland which have rejected "populist-driven and emotive criminal-justice politics".

Calling for early intervention policies, his analysis of the prison muster is even more disturbing than the Corrections Department report.

Around 70 per cent of prisoners "have significant literacy problems", 20 per cent of youth offenders have a learning disability. Nearly all (91 per cent) of prisoners "have a lifetime diagnosable mental illness or substance-use disorder".

Labour's immediate problem is that while it tries to move to a less punitive, evidence-based justice system, the existing system keeps adding to an overcrowded system.

Within the Lambie report are two possible short-term solutions. "Tough on crime" policies introduced since 2000 have added an extra 1800 to the present prison muster.

He points to the remand population having more than doubled since 2000, and how, at the other end of the sentence, the harsher Parole Act of 2002 has increased the proportion of sentence served from 50 per cent to 75 per cent for people with sentences of two years or more.

This has added a cost of $164m a year to the prison bill and increased the prison population by 1500. Relaxing the laws governing parole and remand would provide the short-term safety valve needed. But it will need a parliamentary majority.