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Ministry of Justice reoffending statistics show that those serving a sentence of six months or less have a 59% reoffending rate. For offenders punished with suspended sentences or community orders, the reoffending rate is 24%.
There's a fair chance those figures are skewed by the type of crime committed leading to the sentence given, but shows that showing people there are consequences, and they're close to getting their freedom taken from them whilst not actually doing so, where they might be able to hold on to their previous life and not get exposed to the joys of time inside, does seem to work as a better deterrent than a short stretch and likely coming out to no job, maybe no home but having some new contacts.
Just going to chime in with the more righty opinion no one has yet mentioned...
One of the package reasons why prison isn't deterrent is because of the general cuts in the legal system. If you arrest, sentence and imprison people quickly then they register the consequences. If instead you probably don't arrest them, then when you do leave them waiting for a couple of years before handing out a punishment, then maybe or maybe not put them in prison the whole process is simply so remote that no one, especially a criminal, is going to link the consequences to their actions.
(my opinion on this is entirely adopted from the secret barristers memours)