Yes, you can torture someone and lower a stat, at a heavy price to yourself, and only to people in your own prison. Rarely do people captured in battle get tortured. It is almost always reserved for infiltrators committing assassinations and for particularly notorious enemies.
The fact that it's not used more frequently is only a custom, and a relatively recent one at that. I remember when it was standard practice for Abington and the CE (and presumably their various allies, though I don't know) to torture anyone in military command positions to try and find out strategy info. Heck, that's why the code was changed so that torture could only reveal stuff sent before you got captured, because there were draconian punishments for bribing the guards to get mail as that put current orders at the mercy of the other realm, and Tom got annoyed.
What's the penalty for torture (besides any political repercussions)? A slight honour loss?
