Analysis sets 300-place threshold for Estonia’s prison rentals

Renting out prison places to Sweden is economically reasonable for Estonia only if at least 300 places are leased, an analysis commissioned by the Ministry of Justice has found, ERR reported.

The ministry commissioned PricewaterhouseCoopers to assess the conditions under which leasing prison places would make economic sense for Estonia before negotiations with Sweden began, said Tiina Unuks, head of prison operations at the Prison Service.

“Our aim was to obtain an independent expert assessment of the basis Estonia should use when negotiating the price and what our position could be,” Unuks said.

The analysis found that the price of prison places should depend on the volume of the service. Below a certain threshold, there would not be enough risk margin, or the deal could become unprofitable for Estonia, Unuks said.

The contract with Sweden must therefore guarantee payment for at least 300 places, regardless of how many prisoners Sweden ultimately sends to Estonia. Sweden will pay for the first 300 places in any case, while each additional prisoner will cost 8,500 euros per month.

The analysis also found that Estonia must index its prices and that the contract volume cannot remain unchanged from year to year. The current prison rental agreement includes annual indexation of 3.5 percent, which Estonia and Sweden have agreed on, Unuks said.

Sweden has also agreed to pay six months of the contract fee in advance. If the annual contract is worth 30.6 million euros, 15.3 million euros must be paid six months ahead of time.

Estonia has increasingly more empty prison places

Estonia had about 4,700 prisoners in 2000. By the end of 2022, the combined number of prisoners in the country’s prisons and detention centres had fallen to about 2,100, and the trend has continued downward in recent years.

As a result, Estonia has an increasing number of vacant prison places. There were 1,443 vacant places at the end of last year. Estonia has sought ways to optimise prison management and related costs, including by leasing vacant places to a foreign country.

Sweden pays Estonia 30.6 million euros a year for the prison service, but this is not Estonia’s net income. The amount covers all costs incurred by Estonia in operating the rented prison, including expenses incurred by other state institutions.

The analysis included costs related to healthcare, IT, internal security, the court system and other state agencies. As a result, the cost of housing Swedish prisoners does not fall on Estonian taxpayers.

For 300 prison places, the estimated annual operating cost base is 26.77 million euros. However, the difference between this amount and the contract value cannot automatically be considered state income, as the risks connected with the service and possible additional costs must also be taken into account.

The analysis concluded that leasing at least 300 places would allow Estonia to use its existing prison infrastructure more efficiently and reduce the risk that fixed prison costs would remain too high with a smaller rental volume.

The contract’s impact is being assessed across Estonia’s entire prison system, not only through the budget of Tartu Prison. Estonian prisoners will remain in the country’s prisons, which will continue to require resources for their placement and the enforcement of their sentences. At the same time, the workload of other prisons has increased, creating additional labour and other costs.

The analysis provided Estonia with a clear cost base and profitability threshold for assessing the conditions under which leasing prison places would be economically reasonable.