Law changes are being drafted to allow private companies to once again run prisons.
The Dominion Post reported today that Corrections Minister Judith Collins had instructed officials to implement the policy that National campaigned on.
Ms Collins is keen for private companies to again compete with the Corrections Department to run new prisons, including a 900 to 1200-bed jail due to open by 2012.
Labour's law and order spokesman Clayton Cosgrove said running prisons was core government business and National's move was based on "pure ideology".
The previous National government allowed private companies to tender for jail contracts, and let the management of the new Auckland Central Remand Prison, opened in 2000, to an Australian firm.
Labour canned the contract in 2005 when it passed a law that removed the ability of private companies to run jails.
Ms Collins said it cost $42,000 per inmate to run the Auckland remand centre when it was headed by Australian Correctional Management, compared with the average cost of $52,000 in a Corrections Department facility. The contract for the Auckland jail included a $50,000 fine for each escape.
Mr Cosgrove said the figures were misleading as the national average included the cost of running maximum security prisons.
"The equivalent public prison remand cost was $36,000 when private costs were $42,000. Our experience shows private prisons cost taxpayers more," Mr Cosgrove said.
Labour argues that prisons are a core public service and should not be run for profit. A spokesman said the party would oppose any move to open prison management to competition.
Ms Collins told the Dominion Post she would visit private jails in Australia to see how the system worked.
"At this stage, my views are that we would build the prisons, that they would be owned by the state and that the management contract is what we would be wanting to tender."
