Public To Be Sold Shares In Prisons
The public are to be offered the chance to purchase shares in new prisons under a ‘buy to let’ scheme being considered by the Home Office, it has emerged. The idea has been floated in an attempt to overcome the refusal of the chancellor, Gordon Brown, to find the extra money needed for 8,000 new prison places at a time when the service is at breaking point.
Home Office finance directors, who are looking for alternative ways of funding the next wave of new prisons, hope that the public can be tempted to invest in a new-style property company that would build jails and then rent them out to private prison operators. This would provide a steady guaranteed dividend from the “rental income”.
One incentive for small investors is that the government’s punitive penal policy has seen prison numbers rise relentlessly over the past 10 years and would appear to guarantee a steady stream of rental income with no apparent shortage of prison “tenants”.
The prison population in England and Wales passed the 80,000 mark for the first time this week, with 85 of the 139 prisons in England and Wales officially declared to be overcrowded. The Home Office confirmed last night that it was considering a number of proposals, but the probation officers’ union described the “buy to let” scheme as absurd.
The home secretary, John Reid, is under severe pressure to find the new prison places, but a standstill budget for the Home Office for the foreseeable future means it could take several years to fund and build the new prisons, all of which are to be privately run.
Over the summer the home secretary said he had won cabinet backing for 8,000 extra prison places, with 4,000 to be provided in existing jails and a further 4,000 in three “super-prisons” each housing 1,300 inmates, double the normal capacity. The model uses “real estate investment trusts” (Reits) which are to be launched by the Treasury in January and will enjoy tax exemptions.
They are designed to encourage a wider range of investors in property. This model has already been used in the United States by the Corrections Corporation of America to finance several new privately run jails. According to a Home Office source quoted by Building magazine, finance officials will be considering the option over the coming weeks.
Under the proposed system, the prison operator would rent the facility from the Reit and the income would be channelled back to the investors. Private prison contracts tend to be long-term in Britain, with 25-year leases common.
A Home Office spokeswoman said final decisions had not been made about providing the extra 8,000 prison places; she confirmed that the government was considering proposals for funding their construction through a number of means.
Harry Fletcher of Napo, the probation officers’ union, said: “The Treasury has refused to finance a conventional prison-building programme so Mr Reid is having to go to extreme lengths to find the money. Under this scheme shareholders would have a vested interest in seeing that the jails were full as the more rent that would come in, the higher the dividends.”
He said it was an absurd proposition and wondered what safeguards there would be to ensure that organised crime networks did not invest heavily and buy up the new jails.