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It has been pointed out in previous reports that a considerable proportion of the articles, clothing, boots, &c, purchased for Government Departments and institutions could readily be manufactured in the gaols if the necessary steps were taken by the responsible authorities to see that orders were placed with the Prisons Department. By your direction steps are being taken to provide suitable workshops at Auckland and elsewhere in order to enable a much greater amount of industrial work to be carried on in the central prisons, but our efforts must be supported by the purchasing Departments or no satisfactory results will accrue. There is no reason why some of the rougher classes of brushware, coir mats, boots and shoes, and clothing required by the Government should not be made in the prisons, and the middleman's profit saved to the State. This practice is largely followed in New South Wales and other Australian States with satisfactory results; and while we do not wish, nor shall we be able, to employ such a large proportion of our prison labour at indoor work as is done in the Commonwealth, we could carry on a great deal more of this class of work than we are able to do with the present lack of demand. In this connection I am pleased to say that the Post and Telegraph Department has recognized our efforts to develop business by placing with us an order to manufacture 1,500 reinforced telegraph-poles of various sizes, ranging from 20 ft. to 30 ft. in length. The work is being carried on at Paparua and InvercargiU Prisons, and a number of very satisfactory poles have already been turned out at each place. If a further order can be obtained for supplying the northern districts the industry will also be established at Auckland. It is somewhat unfortunate that other Departments can seldom be brought to recognize the fact that, while they might not be able to obtain their supplies more cheaply from the prisons than from private contractors, the General Government saves practically the whole cost of the manufactured articles over and above the cost of the material used. The reports of the Commissioners of Prisons for England and Wales show that prison labour in the Old Country has been responsible for the production of a large output of articles for the Army and Navy during the war period, and that both prisoners and prison officers have been working overtime for the past two years to keep their production up to the highest pitch. Although the employment of prison labour in the same direction in New Zealand has been suggested, it has not been found possible to accept the departmental recommendation on the subject. Increased means of employing the female prisoners at Addington and other places is also required, but so long as we are unable to obtain work other than washing, mending, and manufacturing articles for our own institutions, so long will there be a number of women in the prisons who cannot be fully employed. Classification of Prisoners. For some time past it has been apparent that a scheme of classification was one of the greatest needs so far as the New Zealand prison system was concerned. To establish such a scheme on a sound and permanent footing under existing conditions is a very difficult matter, but with the assistance of the amended regulations that have been drafted in accordance with your directions it is hoped that a step in advance may be made during the coming year. In view of the depletion of staffs caused by war conditions and the time that will be required to effect the necessary changes in the buildings, yards, &c, we cannot expect to make as rapid progress as we would wish, but there are certain obvious defects that we hope to remove as soon as the new regulations become operative. In regard to classification generally, attention is again directed to the anomalies that exist in regard to the three classes of sentence' —hard labour, reformative detention, and the habitual criminal declaration. The last two named classes are allowed to receive a small remuneration for their work, habituals being even permitted, by regulation, to purchase indulgencies. Hardlabour prisoners, on the other hand, although no worse as criminals than reformative-detention prisoners, and decidedly better than habitual criminals, receive no payment and no privileges except a small gratuity on release. As has been pointed out on other occasions, provision should be made for equality of treatment. Much justifiable discontent among the hard-labour prisoners would thus be obviated, and the work of the officers in charge made somewhat easier. In order to equalize matters to some small extent your approval was obtained to the abolition of the indulgence system as applied to the habitual criminals confined in the Auckland Prison. The new rule on the subject was enforced as from the Ist May last. These men are still paid a small amount (3s. 3d.) per week, but are not now allowed to purchase additional items of diet out of the money so earned. The original intention of the provision for the payment of a small weekly wage to prisoners in the classes named was that the bulk of the money should be used to assist in the support of wives and children. In practice it has been found that the prisoners only avail themselves of this privilege to a very limited extent. In any case the hard-labour prisoner is just as much entitled to consideration in this direction as the habitual and the man undergoing a sentence of reformative detention. In the same way experience has shown that as the Courts make no clear lino of demarcation between the class of prisoners sentenced to hard labour only and those sentenced to terms of reformative detention, both classes should in common justice be placed on the same footing in regard to release on probation on the recommendation of the Prisons Board or of some other body constituted for the purpose. This question is invariably brought before me by hard-labour prisoners during my visits to the various prisons, and it is evidently felt that the differentiation in treatment when there is no difference in the criminality of the respective classes is most inequitable. An amendment in the Prisons Act to remedy this and other anomalies was brought forward in 1915 and again in 1916, but it was not proceeded with. During the recess the matter was brought under the notice of the late Minister, the Hon. Dr. McNab, who stated in January last that he hoped " during the coming session to have such a measure placed on the statute-book." The matter