Lord Warner told The TES that the inadequate levels of support for excluded pupils in pupil-referral units meant prison often offered better educational opportunities.
He said he was concerned about the Department for Education and Skills'
pledge that, from September, all permanently excluded pupils will be found appropriate education from the first day of expulsion. Many will attend referral units, which offer an alternative to mainstream schooling for disaffected or excluded pupils.
But Lord Warner said the units often offered too few hours of education and could further alienate excluded students. "We have a perverse situation where the kids who need education the most are only getting a very low number of hours. Some PRUs have been successful, but the support and time they offer is extremely variable.
"We are in danger of creating a situation where there is almost an incentive to send kids to prison to get an education, which is as daft as it gets in public policy terms."
Lord Warner said he was worried that the DFES still did not know what they would do with pupils who had been excluded before September, and that too little funding was going towards supporting pupils who were no longer in mainstream schools.
The Youth Justice Board is investing more than pound;40 million in improving education for young offenders in jail.
However, the board has written to magistrates urging them not to send young offenders to prison on education grounds. Instead, it wants to see community sentences where the offenders can continue in mainstream schools.
In a report published this week the board stated that poor education for excluded pupils was a major contributor to youth crime.
But its overall findings were positive, as it noted youth crime had stabilised and programmes to cut offending were working.
The DFES insisted local education authorities were receiving enough extra resources to make plans for permanently excluded pupils a reality.
A spokeswoman said: "The vast majority of LEAs are already providing excluded pupils with full-time education and a high proportion of these are already receiving more than 18 hours a week of education."