Prison conditions were bad for many years. An understandable reluctance for the colony to expend its scanty energies and resources on lawbreakers resulted in prisons failing to reach the minimal standard expected in any civilised community. The worst feature was the confinement of children and the insane with ordinary criminals. Other evils were the absence in practice of uniform rules and standards of treatment and lack of security in most gaols. This led to the common practice of keeping prisoners in irons.

The early prisons survived a scathing attack by the Judges in 1861 and the critical report of a Royal Commission in 1868. Only in 1880 did the appointment of an Inspector-General (Arthur Hume, formerly Deputy Governor of Dartmoor and Wormwood Scrubs in England) begin the creation of an efficient prisons system. Under Hume the system was reorganised and greatly improved. Although in many respects his policy was harsh, rigid, and backward looking, he was responsible for some progressive innovations before his retirement in 1909. A road-making camp failed at Milford Sound in 1890, but a tree-planting camp was established at Waiotapu, near Rotorua, in 1901. This was a most significant step. It marked the end of close custody of every inmate, isolation, and unproductive toil as principles of penal policy. The Waiotapu and other tree-planting camps were later superseded by prison farms, which are an important feature of the New Zealand penal scene.

Meanwhile the First Offenders Probation Act of 1886 introduced a new method of dealing with inexperienced minor offenders. Limited in scope until 1920 and for many years little used, even where it was available, the Act nevertheless marked a revolution in penal methods. At the other end of the scale an indeterminate sentence for habitual criminals was introduced in 1906. This was the precursor of preventive detention.

The Crimes Amendment Act of 1910, sponsored by Sir John Findlay, was another milestone in penal thinking. Reformation was to be emphasised. Better classification, individualised treatment, more trade training, and education were to be provided. The keystone was the sentence of reformative detention, which could be imposed for periods of up to 10 years by Judges and three years by Magistrates, even if the ordinary maximum for the offence itself was less. A Prisons Board was constituted to inquire at least once a year into the case of every reformative detainee and habitual criminal and make recommendations as to his release.

The bright promise of this measure proved a mirage. The bold policy it envisaged was not carried out, primarily because the institutions, the staff, and the administrative strength of purpose were lacking, because the sentence of reformative detention was not used by the Courts in the way intended, and because the Prisons Board did not live up to its responsibilities. Reformative detention became the same in practice as ordinary imprisonment, the terms imposed depending on the gravity of the offence and not the needs of reformation. Declaration as a habitual criminal also lost some of its effect, coming to mean in practice simply the addition of a year to a finite sentence. In 1924 borstals were provided for, this being the only important innovation between 1910 and 1954.