The Government's U-turn on sentencing reforms means the number of criminals in prison is likely to remain near record levels for the next six years, Whitehall's spending watchdog has warned.
Ditching plans to halve sentences for offenders who submit early guilty pleas will deny the taxpayer £130 million of potential savings and will result in 4,000 more people in prison than expected in 2015, said the National Audit Office (NAO).
The move leaves the National Offender Management Service (Noms) "scrambling to find savings elsewhere", Margaret Hodge, chairwoman of the Commons Committee of Public Accounts (Pac), added.
Some 86,000 people were in prison in England and Wales in June, compared with the all-time high of 88,179 in December last year, Prison Service figures show.
The Government's original sentencing reforms were designed to give the Ministry of Justice (MoJ) greater influence over what it described as "the unsustainable rise in the prison population". It was predicted the reforms would lead to at least 6,000 fewer prisoners in custody for 2015, but dropping the proposed 50% discount for early guilty pleas in June last year following an outcry over soft sentencing means that fall will be reduced to about 2,000, the NAO said.
Potential savings were also cut, from £324 million to £190 million, with £105 million of this planned between 2013-14 and 2014-15, the MoJ told the watchdog. Noms will find it harder to achieve savings as it will be more difficult to close older, more expensive prisons as a result, said the NAO.
Ms Hodge added: "This decision denies the taxpayer £130 million of potential savings and leaves the agency scrambling to find savings elsewhere. The agency's fragile financial outlook is at the mercy of events, such as last August's riots, and sentencing decisions of judges and magistrates over which it has little control. Even the slightest changes in the prison population can lead to the agency's plans being further knocked off course."
The NAO report said that given the limited reforms which were granted Royal Assent in May, "the department expects the medium projection for the prison population to remain largely stable for the next six years".
Amyas Morse, head of the NAO, added: "The National Offender Management Service has delivered spending reductions and achieved value for money since the last spending review. However, its spending is vulnerable to even slight changes in demand, over which it has no control, and it has very little flexibility to absorb unforeseen costs.
"There are therefore risks to the agency's ability to make sustainable savings over the long term, when the prison population is unlikely to fall significantly and the agency's funding will continue to reduce."