Corrections Minister Sam Lotu-Iiga announces that the government is taking over Serco-run Mt Eden prison as of Monday.

The government is taking over the management of Mt Eden prison as of Monday, following serious allegations of prisoner mistreatment at the Serco-run facility.

Serco staff will remain on site but a management team will be put in place to oversee the day to day running of the facility.

The decision comes after a series of serious allegations at the Mt Eden prison, where inmates are claimed to have been thrown off balconies in a practice known as "dropping", and physically assaulted.

Corrections Minister Sam Lotu-Iiga

Corrections Minister Sam Lotu-Iiga met with Corrections chief executive Ray Smith on Friday morning to discuss what action should be taken.

On Friday afternoon, Smith said he was invoking the "step-in" clause in the contract with Serco.

Smith said Dennis Goodin, manager of the prison at Tongariro, would head the team taking over the day-to-day running of Mt Eden.

Paul Mahoney Managing Director of SERCO makes a statement at Parliament after meeting with the Corrections Minister.

The management staff would be "a crack team" of as many as 20 people selected from around the country.

The cost of the "step-in" would be incurred by Serco, and "substantial" financial penalties were also possible.

The company has already been fined $300,000 over its operation of private prisons.

Other options available under the contract included issuing a final warning, or early termination of the contract.

The break date of Serco's contract was 2016, but Lotu-Iiga would not be drawn on whether it would be ended then.

Smith said he would await the outcome of the Chief Inspector's review - which would look at safety and violence issues - before proceeding further.

There would be another conversation to be had at the end of the inquiries underway, he said.

But he considered that Serco's management of the facility was "salvageable".

Smith was confident that "we will fix it, we will get answers" once the management team was in place.

Lotu-Iiga supported Smith's decision to take over the running of the facility for the immediate future.

Safety of prisoners and staff was paramount in the decision for the government to step in, he said.

"Rest assured we will get to the bottom of this and we will fix it," Lotu-Iiga said.

Lotu-Iiga denied the move was one of "no confidence" in Serco, which would continue to run the Wiri prison.

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He has been increasingly under fire after the third incident of violence at Mt Eden came to light only hours after he'd had an urgent meeting with Serco bosses on Thursday about a number of other allegations, including "fight clubs".

After meeting with Serco on Thursday, Lotu-Iiga had received an undertaking that there were no more allegations or incidents to come out.

Just hours later, Smith issued a statement saying he felt he must consider taking "firmer steps" to ensure the safety of prisoners and staff, after a third prisoner made allegations of mistreatment at the Serco-run facility.

That prisoner had been transferred out of Mt Eden this week, and arrived at another facility with injuries making serious allegations of violence at the correctional facility.

Smith said video footage had been crucial in investigations in the prison, and he had seen some things that were "really disturbing".

Other allegations have included that a prisoner was pushed off a balcony, resulting in broken legs.

Corrections said an investigation concluded that inmate "fell" from a balcony and was subsequently assaulted.

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Labour MP Kelvin Davis has also alleged under parliamentary privilege that another prisoner,

Nick Evans, was subject to "dropping", and died of injuries received at Mt Eden prison.

Evans' death is the subject of a coronial inquiry.

Davis has called for Serco's contract to be cancelled, as he said the company was failing to deliver what it was paid for under its multimillion dollar contract.

"If the minister doesn't have the guts to [cancel Serco's contract] after all that's happened, it's just more evidence he isn't up to it."

Davis said the decision was an admission that privatising the prison was a mistake.

"The Government has gone all in on Serco and it's been a fiasco."

Serco had "totally failed to deliver" on its promise of a high-quality prison, and instead the facility had seen chaos and violence.

Davis said it was "a humiliating backdown" for the Government which had considered privatising other services.

Following Thursday's meeting with the minister, Serco ramped up searches of the prison, which had been in lock-down since Sunday, and staff and visitors were also being searched on arrival.

The Chief Inspector would be investigating all the allegations and the Ombudsman would provide additional oversight.