The education and skills select committee was told that qualifications are the key to reducing recidivism among Britain's burgeoning prison population.
Of the 75,000 prisoners currently in custody, around 60 per cent have a reading ability less than the average 11-year-old, the committee heard.
Paul Goggins, the prisons minister, said: "The old ethos aimed at reducing reoffending was to get the work ethic going in prisons. We now know it is qualifications that move people into work."
Lead responsibility for prison education is being handed over to the Learning and Skills Council, Caroline Neville, the LSC's director of learning, said.
Spending on prison education has risen from pound;97m in 2003-4 to pound;136m this year. In 2005-6, it will increase to pound;152m, she added.
Giving evidence to the committee that is investigating prison education, she said: "Offenders in custody are one of the most disadvantaged groups in terms of access to learning and skills.
"Improving their skills will enhance their employability, and sustained employment reduces recidivism."
She told MPs that three regional "prototypes" will be set up in January to develop and test new ways of delivering education and training in prisons.
The prototypes, in the Northwest, South-west and North-east, will work closely with the new National Offender Management Service (Noms) that has been created to draw up individual learning plans for offenders.
Noms is to ensure continuity and progression of learning for offenders when they are moved between prisons, and for when they are released from custody.
A suggestion from MPs that prisoners prefer to work rather than learn in jail because they earn more was rejected by Janice Shiner, giving evidence for the Department for Education and Skills.
She said: "There is no evidence that is happening. Some prisons insist that prisoners cannot undertake work until they have basic skills training."