The Ministry of Justice says it is "considering all viable options" to increase capacity on the prison estate, as the latest statistics show there are only about 1,000 places available.
The government is considering sending offenders to Estonia as a means of alleviating severe overcrowding on the UK prison estate, Sky News understands.
Having offenders serve out their sentence in the Baltic state is one of many options on the table to address overcrowding on the prison estate - with the latest government figures showing there are only 1,098 free spaces in prisons across England and Wales.
Since coming into office, Shabana Mahmood, the justice secretary, has warned overcrowding could lead to a breakdown in law and order if action is not taken to alleviate pressure on the system.
However, while No 10 said the government was clear it had to bring in reform to tackle the prison capacity crisis, they poured cold water on the idea of using Estonian jails - an idea first floated by the previous justice secretary Alex Chalk.
"Alongside our commitment to building prisons, we’ll be publishing a 10-year strategy in the autumn to set out how we will ensure that we always have the places that we need to keep dangerous offenders behind bars," the prime minister’s official spokesperson said.
"[But] on those reports specifically, I would point out that this was the policy of the former government and that this government has made no such plans or announcements."
Last month, with the country still feeling the impact of the riots that took place in the wake of the Southport stabbings, spare spaces were understood to have been reduced to just 100 in male prisons across England and Wales - the closest the system has come to running out of capacity.
Speaking to Sky News this morning, Home Office minister Dame Angela Eagle did not rule out the proposal, saying the new Labour government had "inherited an absolute crisis in our prison system with very few places remaining there".
She said: "I think that colleagues in the [Ministry of Justice] will be considering anything that they can to alleviate the problem.
"What we cannot have is people who are convicted of perhaps violent or serious crimes not being able to be in jail."
The government has already taken controversial steps to alleviate overcrowding, including by allowing the early release of prisoners who have served 40% of their sentence.
Prisoners in England and Wales, apart from the most serious offenders, are usually released on licence after serving 50% of their sentence - but from this month, this will be reduced to 40%.
Magistrates were last month told to consider pushing back the sentencing of criminals because of concerns about overcrowding.
But a former lord chief justice said the government needed to look at the growing length of sentences to tackle the problem, rather than looking abroad.
Lord Thomas told Sky News: "We have been changing sentencing legislation on and off over the last 15 to 20 years without really looking at the effect as a whole. People have been required to spend longer... in prison, and all of these have a cumulative effect.
"And we need to stand back and ask ourselves, have we got the resources balanced correctly? Has the increase in sentencing reduced crime? Has it had the right effect?"
He said the Estonia proposal was "really good evidence of what’s wrong", adding: "It [would be] sending prisoners to a country that is a not a very short distance away and not always inexpensive to get at, and means you cut prisoners off from what is critical to them, which is staying and being in touch with their families."
Former justice secretary Mr Chalk told last year’s Conservative Party conference that the then-government under Rishi Sunak would enter exploratory discussions with countries in Europe over the possibility of renting prison space abroad.
The previous government said it would only enter into an agreement with European countries provided aspects of the prison system, including facilities and rehabilitation, matched UK standards.
It argued its policy was in line with steps taken by Belgium and Norway, which have used foreign prison places in the Netherlands in the last decade.
In her first speech as justice secretary, Ms Mahmood blamed Mr Sunak "and his gang in Number 10" for being "too weak to heed the warning signs that were flashing".
More than 10,000 prisoners were released early under the previous government between October last year and June this year, leaked documents suggest.
A Ministry of Justice spokesperson said: "The new government inherited a justice system in crisis, with prisons on the point of collapse.
"We will continue to investigate all viable options to increase the number of places in the prisons estate so we can keep locking up dangerous criminals and protect the public."
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