Does Serco give Key pause over privatisation? 'Not in the slightest,' PM says

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Prime Minister John Key is leaving open the possibility of cancelling Serco’s Mt Eden prison contract, saying National is “not shy” at exercising penalties.
 
“I expect them to meet that contract. If they don’t meet it, all hell will break loose, including the financial penalties," the PM said during an interview with Lisa Owen from the National Party conference being held this weekend in Auckland.

However, he said Serco deserves “natural justice”.
 
Mr Key said Serco’s failings do “not in the slightest” give him pause to reconsider the government’s push to use more private providers in health, state housing, education and welfare.
 
Contracting to private providers brings accountability, efficiency and innovation, and price tension, the prime minister said.
 
Serco’s record on rehabilitation suggests they are “capable” of running the new $840 million Wiri prison, the PM said, although he added  “I’m not prepared to say that they are absolutely in control of everything that’s going on until I see those reports”.
 
The cause of Mt Eden inmate Nick Evans’ death is “highly contested” and information he has seen does not suggest “injuries which would be commensurate of someone thrown over a balcony," Mr Key said.

RAW DATA: The Nation transcript: Lisa Owen interviews John Key at the National Party conference

Watch the interview here

Patrick Gower: In Auckland, the blue balloons have been inflated, and the security is in place. The National Party’s annual conference has kicked off at Sky City, but John Key might not be feeling particularly lucky, because the Government’s privatisation agenda has been called into question after it had to step in yesterday and take control of the scandal-hit Mount Eden Prison from outsourcing giant Serco. The problem is that the Government has been touting outsourcing as the solution for everything from social housing to services for the disabled. Lisa has just got back from speaking with Prime Minister John Key.
Lisa Owen: Well, following a litany of serious allegations at Mount Eden prison, the Government’s been forced to take control of the prison. Why not put them on a final warning, why not take the contract?
John Key: Simply because we don’t have the facts at the moment. There are a number of inquiries, a number of claims, some of which may well be substantiated and some that may not be. But I think it’s worth taking a step back for a second and say, ‘What are our expectations of Serco?’ Well, they’re pretty straightforward. They are to honour their contract. If they don’t, potentially financial penalties or other penalties. Secondly, it’s actually to keep prisoners safe. And the third is actually to make sure that the minister—well, the Ministry of Corrections, therefore the Minister, is kept informed of any issues. I expect Serco to meet those obligations, and if they don’t, well, there will be very serious consequences.
Well, hang on. You’ve got a dead prisoner already and you’ve got a prisoner with two broken legs after going over a balustrade and revelations of another serious assault this week. What is it going to take?
Yeah, so the first thing I think is important to say is the Government is acting as it gets that information in quite quickly. So the fight clubs and the claims of those, that video footage emerged Thursday week ago, and by Sunday, there was an inquiry, and it’s got a couple of independent parts of that, including the Ombudsman, overseeing that. In terms of the claims against Nick Evans, that he died as a result of being thrown over a balustrade, well, actually, that’s highly contested. In fact, if you look at The Herald this morning, they’ve got a story in there basically saying that he died of a superbug, that he had no—
But the thing is, Prime Minister, your minister knew there was problems and issues in February.
Okay, so the important point, I think, to make here, though, is there are claims, particularly in the relation to Nick Evans which are unsubstantiated. So as I say, if you look at the report in The Herald this morning, it says that Nick Evans died of a superbug and he died of issues in relation to a perforated lung which are consistent with some other things he might have done and demonstrated no broken bones. It also interviews a number of— or has reports of a number of inmates at Mount Eden Prison who say they’ve never heard the term ‘dropping’; he wasn’t thrown over a balcony. My point is this – there’s a full coronial inquiry. It’s completely independent, and it’s very thorough. You say that the Minister was aware of this. What the Minister was aware of was that someone died in Mount Eden prison. He was aware that there was a full coronial inquiry. There was an allegation made at the select committee that he was thrown over the balcony. It proved to be incorrect.
This not just one case. You’re focusing on one case, but this is a series of serious allegations with video evidence in some cases, in terms of the fight club, and do you realise that obviously more allegations are coming to light and they involve serious sexual allegations? Are you aware of that?
Well, I’m not aware of those ones, but my main point is this—
Why not?
Well, because firstly, I don’t get every single piece of information that goes on. I’m Prime Minister, not a) the Minister of Corrections or, more importantly, the chief executive of the Corrections department. But what I do know is where information has come to the Government, clear information that can be substantiated, like the video evidence of the fight club, the Government acted very quickly. We saw that information on the Thursday. There was a full inquiry announced by the Sunday. There’s a full coronial inquiry into Nick Evans. This week the Government took the action of stepping in to put in Ray Smith, the chief executive of Corrections, words, with a crack team in there to see what’s going on.
But you could put this company on a final warning, because that would give you options and allow you to act a time when you wanted to terminate the contract, but you’re not even putting those wheels in motion.
Well, I think there’s a process that you step through here, and stepping in, which is the technical term for the first thing that we’re doing, is the right and appropriate way of doing this. We step in, we put that 20-person team in, and we get, actually, the facts. Because I think what New Zealanders would say about all of this is that they acknowledge that prisons are dangerous places. They probably acknowledge that from time to time in prisons, whether they’re run by the public sector or the private sector, there are issues in New Zealand and there have been. What their expectations are, though, is that those issues are dealt with. All I can do is actually make sure that the company is held to account. My expectations are very clear of that company. If they can’t meet them, then—
But these are our most vulnerable citizens, Prime Minister. You have promised a better future for all New Zealanders, and that includes people who are behind bars.
Yes, and that’s why the Government has acted, I think, both thoroughly and carefully, but the point is – it’s not unusual for an opposition politician to make an allegation which is unsubstantiated. This week, I think it was, basically Kelvin Davis said and actually said without parliamentary privilege now, that Nick Evans was thrown over a balcony and died as a result of it. I saw some information which indicated that he was inspected—
But there’s not just—
Just let me finish.
But there’s not just one allegation, Prime Minister—
Just let me finish for a second.
I think it’s important—
No, this is a very important point. No, let me finish.
…that there are other allegations coming from outside sources—
Okay, Lisa, let me finish, otherwise there’s no point in having the interview.
…from parents from prisoners.
Okay, so I saw some information earlier this week which indicated that he was inspected on a number of occasions, and on those occasions he didn’t demonstrate any reporting as a result of that that he had injuries which would be commensurate of someone thrown over a balcony. That’s exactly what’s also in The New Zealand Herald this morning. My point is – it’s not unlike opposition politicians to make claims which actually prove to be incorrect. Now, I’m not saying that there aren’t a whole lot of issues that need to be investigated, but the Government takes those very seriously. But we operate on the facts, not on what someone tells someone hearsay.
Well, let’s look at some of those facts from overseas, then. Serco’s record is terrible overseas. It was banned from UK government contracts for six months. It had to pay back £60 million for almost fraudulently administering a contract, and it lost a hospital contract in Australia for not sterilising equipment properly. Are you surprised that it’s come to this, given this company’s track record?
I don’t think you can necessarily say because they’re those particular issues that they’re not fit to do something else somewhere else. What you can say is we set through the contract a series of expectations we expect them to deliver. They actually have a very, very good record, as my understanding, when it comes to rehabilitation, for instance, and they’re running Wiri prison now, which, as you know, has been established in a way where rehabilitation is a big focus of that prison – huge trades training and the likes in there – for the very reason that if we want our communities to be safer, we’ve got to expect people to, if they do the crime, do the time. We’ve also got to work hard to make sure that when they come back into our society, they actually can work and operate and not go back to a life of crime.
With Wiri and Mount Eden, they’re in control or will be in control of a quarter of our prison population. Are you confident, given what we’re seeing and hearing at Mount Eden, that they can run Wiri prison?
I believe that their record of rehabilitation, the work they’ve done in that area, supports the view that they are capable of doing that. I’m not prepared to say that they are absolutely in control of everything that’s going on until I see those reports and those inquiries, until I understand everything. That’s why the Government has stepped in. I will say… I mean, I’m not the absolute expert in these things, but there are two independent monitors in Mount Eden prison already, so the question is why aren’t those people…? If the issues are what people say they are, why aren’t they actually coming forward prior to this?
The point is you mention the monitors, but this whole thing came to light not because of that monitoring or that oversight or Serco’s own reporting or putting its hand up; it came to light because of whistle blowers, because of relatives of prisoners and prisoners themselves releasing information. Isn’t that evidence that there is a fundamental failure of how the private operations of prisons is working?
No. I think the first thing you can say is that prisons are dangerous places; they lock up some of the violent people that we have. Some of the issues could be related to gangs, and we know that just because someone goes to prison, doesn’t mean those gang affiliations go away – in fact, if anything, those gang affiliations are probably even stronger, if it’s even possible, in prison. What we do know, though, is in giving Serco a contract, we have very strong expectations of what they should do. I expect them to meet that contract. If they don’t meet it, all hell will break loose, including the financial penalties, at this point, to step in, and further other issues could be taken up with the company if it’s proven. But what I’d say is my expectations of Serco, and I think New Zealanders expectations of me, would be that they also have natural justice – we actually find out the facts – because I’ve seen the Labour Party go down these routes before where they make these wild claims, they’re actually not backed up, and then they quietly go away into the corner. I mean, this week there was a report in the Herald about a charter school, or a partnership school, every day giving kids takeaways and Kentucky Fried Chicken. Well, guess what? Actually, that wasn’t correct, and what actually really happens is they have had one shared lunch. I mean that’s the point; people get it wrong.
I just want to pick up on your comment – you say if they don’t deliver, all hell will break loose. What do you mean? You’ll can their contract?
Well, what we have... The one advantage…
Will you can their contract if they’re not delivering?
Potentially, because we have the advantage, through a privately run prison, for something we actually don’t have in a publicly run prison, and that is we have a contract. They have to honour that contract. If they don’t honour that contract, right through the process there are penalties and remedies available to the Government. We’re not shy at exercising those.
So to be clear, you’re leaving the option open? You’re leaving the option to terminate their contract open should these investigations show that there are failings?
Well, if that was…
Yes or no?
Yes, if that was warranted, but we need to go through a thorough process. We actually need to get the facts.
The prison is just, actually, part of the Government’s move to bring in private providers into all kinds of areas, including charter schools, social housing, social bonds. Doesn’t this, at the very least, give you pause to rethink whether private providers are the best option?
Not in the slightest. I mean, we’ve had private providers in New Zealand for a very long period of time. I mean, in the good old days, Ministry of Works used to build schools; now private sector construction companies do that. You go to your GP – that’s probably one of the largest parts of the health system that we have – and actually, they’re private providers. You go to a retirement village in New Zealand, they’re largely private providers. In my own electorate, we’ve got a couple of new schools which basically have got a PPP contract; they don’t administer a whole lot of the things in their school, including the facilities that are administered by others. So there’s definitely a happy marriage that can take place between the public and private sector.
But the thing is they’re only as good as… if they’re policed, and like with Serco, who seems to be failing to the point where you’ve put in someone to take over the prison, and this kura in Northland, that advice was it should be closed, unless you’re prepared to act and shut them down if they fail, it’s not going to work, is it?
Correct, and that’s why…
But you’re not stepping in to shut them down.
Quite wrong actually. On the Thursday we saw the video footage emerge; on the Sunday there was an inquiry. If the inquiry proves that there are serious issues, they’ll be dealt with, and there’s a range of remedies. We have the situation with Nick Evans, yes. Well, it’s a very, very serious issue. This is a man who’s died. There’s a proper coronial enquiry. Look, across the public service, we spend tens of billions of dollars a year. We provide a huge range of services. It’s not the first time that there’s a problem in something that is a service delivered to New Zealanders, and it’s not unique that that happens, but what is important is that the Government, in acknowledging that something’s gone wrong, deals with it, whether it’s in the public or private sector. You can’t say we’re not acting. We’re absolutely acting.
Prime Minister, the thing is your critics would say, and critics of private providers will say, is the thing is you lose control of them; you lose control of accountability.
But it’s the opposite. It’s the complete opposite. If we have a public prison and there’s a fight club, well, we can’t close that prison if it’s run by the Corrections Department. Do you think that there’s never been a fight in any other prison in the time that either we’ve been the government or previous governments…?
So does that make it okay for it to happen in a private provider?
No, but you’re asking about whether it’s okay. It’s not okay. I made that quite clear to you. Prisoner safety is really important. What you’ve said is what can the Government do and what will it do? If I was sitting here this morning saying, ‘Oh well, the video footage came out. Oh well, someone’s passed away. I’m very sorry about that,’ then rightfully so, you would vow to attack me as not taking my responsibilities seriously. Well, I take my responsibilities very seriously, and when we see evidence of something, we act. We are acting.
Okay.
That is the advantage of the private sector model. We can act; we can deal with it. But, in my view, it’s about a balance.
You have very much stressed evidence, that you want to look at the evidence, and your decisions are evidence-based. So if the evidence shows that Serco and projects like that are not working, will you reconsider the likes of private providers for social bonds and social housing?
No, because the specific contract— if Serco have a contract—
Because it sounds like ideology, not pragmatism.
No, because look at the history of New Zealand. We’ve just gone through it. Retirement villages, GPs, there’s a range of things, and we don’t rip all of those up today because Serco may or may not have allowed a fight club to take place in a prison. What we’re saying is that contract is around that facility and that operation. We expect them to get it right, and if they don’t get it right, we’ll hold them to account. But it doesn’t mean there’s no place in the provision of public services for the private sector. What the private sector does is a) bring in that accountability that we’ve got, b) actually it often brings in a lot more efficiency and new innovation, and thirdly, that actually brings in a tension – a price tension – in the system.
I just want to say, you’re here at your conference, third term, you’ve got the Serco issue, you’ve had the Saudi farms, you’ve got the disappearing surplus, you’ve had Ponytail-gate. Is this your toughest year yet?
No, not at all. I mean, um, I think any year you sit me down as prime minister, you vow to list a long list of things. It might be different ones, but nevertheless you’d be able to list them out.
All right, thanks for joining us this morning, Prime Minister.
Okay, Lisa.
Appreciate your time. Thank you.

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