£350m Black Hole In New Prison Plan

The Home Office is facing a fresh financial crisis after it emerged it has failed to secure funding to run 8,000 new prison places, including two jails in Liverpool and London.

{mosimage}The expansion of prison capacity has been touted by John Reid as his greatest success since taking over as home secretary, but senior officials have told the Guardian that, while money will be made available to underwrite the building of the prisons, the Treasury has refused to foot the bill to run them.

With annual costs per prisoner standing at £44,000 the deficit will reach £350m a year when the prison building programme is completed.

The Home Office budget has already been frozen for three years, so daily running costs for the extra places in England and Wales required to meet the prison overcrowding crisis will have to be met by cuts elsewhere, in Mr Reid’s budgets for police, probation and immigration.

“We can raise the capital cost to build them, but we haven’t got the revenue money to run them,” said one senior Home Office official. Whitehall sources confirmed that the chancellor, Gordon Brown, had agreed to underwrite the costs of the private sector raising £1.7bn to build Mr Reid’s 8,000 extra places over the next five years.

But his decision not to fund running costs is a fresh blow to Mr Reid, who said last July that the building of the extra 8,000 prison places was a crucial factor in stabilising the situation when he took over at the crisis-battered department.

The Treasury has repeatedly made clear to Mr Reid that, despite the overcrowding crisis, it will not reopen the Whitehall budget negotiations over the 2008 spending review which settled the government’s spending programmes for the next three years.

Mr Reid’s failure to fund the running costs of the prison places comes on top of a Treasury demand for £240m of efficiency savings in the prison service over three years. Prison governors yesterday said that was a “bizarre proposal” which would threaten public safety at a time when the prison service was being asked to make “such a massive contribution to the cost of new prison places”.

In a speech at HMP Kennet on Merseyside – one of the jails that will open under the building programme, Mr Reid said the first 350 of the 8,000 extra places will be available from this June in buildings converted from disused wings of the Ashworth secure mental hospital.

At the same time, work will start on building a permanent 600 place prison on the Ashworth site to open in 2010. A second prison is to be built next to Belmarsh jail, in south-east London. In the meantime prefabricated units, built in Austria and China, are to be installed within the grounds of existing prisons.

In his speech Mr Reid acknowledged that “a significant hardening of the general sentencing climate” had been the most important factor fuelling the rise in the prison population.

He reiterated his belief that non-serious, non-violent offenders should be dealt with through punishments in the community instead of short prison sentences, and that there was no place for those with serious mental disorders in prison.

Juliet Lyon of the Prison Reform Trust described Mr Reid’s announcement as “panic building on a grand scale”, and said the government was in danger of turning Britain into a “penal colony”. Prison numbers had risen from 60,000 in 1997 to 80,000 now, with reconviction rates running at record levels.