A package of measures to head off a summer prison overcrowding crisis, including abolishing the option of custody for shoplifting offences, has been vetoed by Tony Blair, The Times has learnt.

The Prime Minister has turned down a series of proposals from Lord Falconer of Thoroton, the Lord Chancellor, who will head the new Ministry of Justice when it is created formally tomorrow, for reducing the use of custody for low-level offences.

Lord Falconer also suggested shorter sentences for nonviolent offences, restricting the use of suspended sentences that tend automatically to lead to prison after reoffending, and ending the prison option for shoplifting where the value stolen is less than £200.

Ministerial sources say that Mr Blair, who will leave office in two months, is adamant that part of his legacy will not be a relaxation of sentencing policy.

But his stance means that the overcrowding problems could reach their peak soon after Gordon Brown succeeds him as prime minister, leaving him with the politically fraught dilemma of how to lower the numbers.

The Times has also established that an explosion in the use by the courts of a new “indeterminate” life sentence is predicted to send the number of prisoners serving life in jails to a “crisis” level of 25,000 in five years.

Huge numbers of offenders are being given the flexible jail term, which is driving upwards the overall number of lifers in the prison system.

At the same time thousands of dangerous offenders, including child abusers and wife-beaters, will face indefinite jail terms after a landmark Court of Appeal ruling won by the Attorney-General.

The decision last week means that dangerous offenders currently being released when potentially still a risk to the public will now be kept in prison.

Insiders at the new Ministry of Justice say that they face a certain overcrowding crisis in July unless urgent action is taken.

At present, the prison population stands at 80,591, only a few hundred short of maximum capacity. About 400 temporary prison places in police cells were set aside in October, and last Friday 314 of them were occupied.

Lord Falconer has told colleagues that the creation of the justice ministry offers the opportunity to set a new direction on sentencing and avert a crisis over the summer months.

Officials point to the impact of the letter to magistrates, in January, from John Reid, the Home Secretary, which reminded them of existing sentencing guidelines. This led to a month of declining prison numbers, with the population going back its previous level in mid-March.

In a memorandum to the Prime Minister dated April 20, the contents of which have been divulged to The Times, the Lord Chancellor set out proposals for revised sentencing guidelines, designed to produce a longer-term reduction in the number of offenders committed to custody.

These included:

— reducing the use of custody for persistent, low-grade offences and expanding the use of tougher community sentences;

— curbing the length of sentences for nonviolent offences such as theft and criminal damage;

— removing the option of a custodial sentence for shoplifting offences in cases where less than £200 worth of goods are stolen.

Lord Falconer also proposed curbing magistrates’ use of suspended sentences, which officials say result in too many low-grade offenders being sent to prison automatically for low-grade second offences.

The Prime Minister discussed the proposals with the Lord Chancellor two weeks ago, and is understood to have rejected them all.

Insiders say that he gave warning that the proposals would send the wrong signal about the Government’s attitude to low-level crime.

The Prime Minister has also written to the Home Secretary and the Lord Chancellor urging them to press ahead with plans to introduce “prolific offender licences”, designed to tackle hardcore persistent offenders. Ministry of Justice officials gave warning that these could put up to 3,000 more offenders into custody over the next year. They say this would be “unsustainable”.

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