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In his 1822 book, "Travels Around Ireland", the surgeon and prison reformer Thomas Reid describes the Old Gaol of Down as

[…] bad as it is possible for a building of that sort to be. The construction renders classification, inspection and employment utterly impractical […] tried and untried, innocent and guilty, debtors and murderers, are all thrown together in one corrupting mass, and kept in a cell not near large enough. The smell from some of the felon's cells was intolerably offensive. The prison is insecure and so wretchedly constructed.

This damning statement was published in the same year a group of prisoners penned a petition against the conditions. "We have not been supplied with cloths of any description,” they wrote and described the lack of adequate food. “We formerly were allowed four stone of potatoes and seven [pounds] of oatmeal each week but now we are allowed no more than two stone and a half of Potatoes and three pound and fifteen ounces of oatmeal.”

Such problems were familiar to the Old Gaol; overcrowding and poor conditions had been rampant it since its opening. Captain Sydney Hamilton Rowan, elder of the Presbyterian Church in Downpatrick and brother of a prominent United Irishman, was Inspector of the Gaol from 1823 to 1830. He introduced a stricter code of management to increase cleanliness, a new cooking system, new work regimes for both men and women and better schooling of inmates. Yet, despite Rowan's best attempts, the conditions in the Old Gaol remained inadequate and it became clear a new gaol was needed for Down.

Construction began on the New Gaol in 1824. Located on a four-acre site, the New Gaol's gatehouse stood less than 200 meters from the old. Built by John Lynn, a carpenter and later architect from England, he had finished constructing Sligo County Gaol the previous year. To access the stone needed for construction, Lynn established a quarry above Newcastle and, in 1830, completed the New Gaol. In total it cost £64,000, a little over six million pounds today.

Following the designs of the Edinburgh architect Robert Reid, the New Gaol implements the "virtues of security, classification, ventilation, employment, education and solitary confinement,” as laid out in an 1819 enquiry. It consisted of four wings radiating from the central hexagonal tower. The two rear wings housed male prisoners, while the two front wings held females and debtors. This strict classification system also included the separation of youths from adults, which had been missing from the Old Gaol. The central tower housed kitchens on the ground floor, the governor's residence on the first floor, and a chapel on the top floor. Infirmaries for both men and women were located in the Gaol's gatehouse. Much larger than the old gaol it had 150 cells and 67 other rooms with beds. During the refurbishment of the courthouse, after a fire in 1855, a tunnel was built that linked it to the gaol. This tunnel was eventually blocked in the 1990s, almost a century after the gaol closed.

Captain Rowan, the last Inspector of the Old Gaol, was appointed by the grand jury and became the first Governor of the New Gaol from its opening until he died in 1847. As Governor, Rowan oversaw the transfer of prisoners from the Old to the New Gaol and tried to implement a separate system that allowed one prisoner to one cell and combined it with a silent system that allowed the prisoners to mix but without communication. Prisoners would often spend twenty hours a day locked in their cells with four hours to undertake work or education. With their lives heavily restricted to their cells, new fixed iron bedsteads replaced hammocks. At the same time, partition walls between wings were removed to allow light in.

The New Gaol’s population peaked in 1851 with 312 prisoners incarcerated. This number may have been a result of the Famine, as gaols across Ireland witnessed an increase in prisoners as people turned to petty crime to survive. However, by 1869, the number of prisoners had rapidly decreased to 70, leaving over half of the cells empty. By 1884, the Gaol had been demoted from the county gaol to a convict depot. It was during this period that the Gaol’s most famous prisoners arrived. In October of 1884, prisoners from England were transferred to the Gaol, including eight members of the Irish National Invincibles who had been involved in the Phoenix Park Murders of Permanent Under Secretary Thomas Henry Burke and Lord Frederick Cavendish in 1882. Among them was James Fitzharris, known as Skin-the-Goat, who was the getaway driver. While found not guilty of the murders, he was retried in May 1883 and found guilty of conspiracy and being an accessory to murder and sentenced to penal servitude for life. 

By the 1890s, the prison system in Ireland had moved toward centralisation and away from County Gaols. In 1891, the last prisoner was transferred from the New Gaol and the site was closed. In 1927, Thomas J McKelvey, a contractor from Ballynahinch, bought the site for £21, and by 1929, the buildings were demolished. The site was used for the construction of Down High School in 1933. The school's gatehouse and part of its stone are the only physical reminders of the site’s history as a gaol.