Firm running business in jail given free power

A ROW has broken out at board level in the Prison Service because an American-owned company was allowed to run a private business from inside a prison, taking advantage of free electricity, gas and telephone facilities.

Wackenhut (UK), a division of a large American security company, runs a laundry and engineering business from within the walls of Coldingley prison, in Surrey. Most of its workers are serving prisoners. The company was allowed free utilities worth pounds 40,000 and was given an interest-free loan of pounds 100,000 from the Prison Service to buy raw materials.

Critics in Prison Service headquarters said the special treatment was given to Wackenhut because jail bosses want similar privately run projects to be set up at other jails and were desperate for the venture to succeed. One source said: "Why would you enter a contract with somebody and then loan them the money to do the work and give them free utilities? In a public service like ours, open dealing is essential. If proper accounting procedures have not been observed there should be a formal investigation."

Wackenhut's involvement at the prison is regarded as a flagship project designed to improve the profitability of prison industries by bringing in private-business efficiency.

Coldingley is one of half a dozen "industrial" prisons, providing inmates with low-paid employment which gives them work experience before their release. Wackenhut took over running the operation in November. Questions began to be asked about the contract negotiated by the Prison Service with the company after an independent researcher from Thames Valley University carried out a study of the efficiency of prison industries.

It was discovered that the private company was not being charged for its power or telephone calls and had been provided with the loan to overcome start-up problems.

The matter has been referred to Martin Narey, the director of regimes at the Prison Service, who is said to be "very unhappy" with the arrangements. Some senior officials have called for the affair to be passed to the service's internal audit investigation unit.

Last night the Prison Service said changes had been made to the original contract.

A spokesman said: "A formula has now been established for the payment of utilities. The governor is looking at ways of recovering utilities owed."

He said the loan had been in accordance with the contract and that the money would be repaid within the course of the financial year. The Home Office is anxious to make greater use of prison industries and part of the pounds 200m made available for prisons in the comprehensive spending review will be spent in this area. But Harry Fletcher, assistant general secretary of the National Association of Probation Officers, said it was not clear that private companies were the best people to run such operations. He said: "If there are irregularities in this contract then there must be a full public inquiry."

No one from Wackenhut (UK) was available for comment.