The Treasury is hampering efforts to rehabilitate prisoners in Britain's jails, the chief inspector of prisons, Sir David Ramsbotham, has claimed.

He told the BBC Today programme on Thursday: "Frankly, I do not think the prison service is being helped by the Treasury demanding that money that is given is given back every year in the form of efficiency savings. As you increase the numbers you actually need more money, not less, and if money is being taken away all the time it makes it less likely it can do the work with prisoners it is required to do.''

Sir David also warned that the prison population is increasing faster than the rise in capacity from new jails being built. The prison watchdog said that government efficiency savings were taking money out of the service at a time when it needed more investment and called for a review of the role and the cost of jails.

He said the present building programme would be unable to keep up with demand if predictions of the prison population reaching a record 68,000 by 2002 proved correct."Overcrowding is not just a question of the number of cells in which you can put people, it's all the other things. It's not just locking them up and doing nothing with them. Overcrowding means are there enough workshops, educational provisions, drug treatment programmes, offending behaviour programmes? Are there enough staff to administer these programmes? The answer is on the whole 'no'," he said.

His remarks followed comments on Wednesday by Tory leader William Hague who claimed that even more people would need to be put behind bars in order to tackle the country's crime problems.