The three-year, pound;21 million "custody to work" package, to improve job prospects of prisoners through literacy and numeracy classes before and after their release, follows last month's pound;18m programme to increase the number of prisoners gaining qualifications by 50 per cent.
Future prison education funding would be devolved to the Department for Education and Employment and ring-fenced, with targets agreed between the Prison Service and DFEE, Home Secretary Jack Straw told a conference of prisoner rehabilitation charity NACRO this week.
"The focus of prison education has changed," he said. "We inherited a programme which I think was too recreational, too little focused on making prisoners employable."
But the Government's record on prison education was criticised this week when Lord Longford said risoners had better education under the Tories.
During a debate in the House of Lords, Lord Longford said increased spending (from pound;29m to pound;41m) was offset by a 50 per cent rise in the prison population.
"It is clear that an individual prisoner is not as well-off in terms of his education today as he was in the days of the ... Tory government," he said. "That cannot be acceptable to Labour supporters like myself."
Home Office statistics show that nearly half of the 97,000 prisoners screened last year were less fluent readers than the average 14-year-old. Even more were behind 14-year-olds in numeracy (65 per cent) and writing (81 per cent).
Mr Straw said he wanted to see the number of ex-offenders in employment doubled. At present, just 12 per cent of prisoners find a job after they are released.
The new initiatives come in the wake of a damning assessment of inconsistency and failure in prison education by the chief inspector of prisons, Sir David Ramsbotham.