The releases were stopped on Friday after Michael Howard, the Home Secretary, had taken advice from a senior barrister, but it was too late to avert an outcry about mismanagement in the country's prisons and the extent of Mr Howard's responsibility.
Calls were mounting last night for heads to roll, and while Mr Howard insisted he would not quit, the head of the Prison Service, Richard Tilt, last night decided to return early from holiday in Italy to face his critics, and to oversee a legal action this week challenging his early release programme.
Mr Tilt who took the decision that a misinterpretation of the law since 1967 had resulted in some multiple offenders being locked up for too long.
As the sequence of events clarified yesterday, attention focused on the legal advice given and the extent to which ministers were informed. It was last February that a "clarification project team" of prison officials was set up to redraft the manual on sentencing, after inconsistencies in the time some inmates spent in jail were noted in October.
A Home Office lawyer advised the Prison Service on the changes, but when Mr Tilt and his team took the decision to release prisoners and reduce sentences they did not seek more senior legal advice. Legal experts said this was unusual and surprising. Last Friday, Mr Howard contacted David Pannick QC, who said the Prison Service decision was wrong.
Last Wednesday afternoon, just as the first prisoners were being freed, memos about the releases were sent to the private offices of Mr Howard and Ann Widdecombe, the Prisons Minister, but their officials failed to alert them. "It is extraordinary that ministers were not consulted," said Ms Widdecombe last night.
A Prison Service spokeswoman yesterday said: "We are now in full agreement that this decision should be challenged in the courts." She added that the Service took full responsibility for the decision. The Home Office expects a wave of writs from prisoners, and will challenge "one that will give us the best chance of a comprehensive judgment".
An inquiry, headed by Alan Walker, deputy director general of the Prison Service, has been set up to investigate the fiasco, and will report to the Home Secretary on Wednesday. Mr Walker said yesterday that if he was found "personally culpable" he would consider quitting.
Alan Beith, Liberal Democrat Home Affairs spokesman, said the situation was a scandal. "The Home Secretary's head should roll." Jack Straw, Shadow Home Secretary, said: "If Michael Howard had spent less time on publicity exercises and plotting against John Major and John Redwood, and more time doing his job, this fiasco might not have arisen."
But Mr Howard yesterday rejected the notion of quitting. It is the position of Mr Tilt that seems increasingly precarious as he was aware of the decisions, but apparently failed to ensure that the Home Secretary was informed. Senior Home Office sources, however, suggested that he would probably get a reprimand rather than the sack.
The dismissal of the director general of the Prison Service, so shortly after the removal of Derek Lewis, the former head, would be highly embarrassing to Mr Howard. "We couldn't afford to lose another director-general," said a Home Office insider.
At the heart of the row is the question of whether the Prison Service has miscalculated sentences for some offenders ever since 1967. The time inmates spent on remand before trial had only been taken into account once, but it was argued that where prisoners served several sentences consecutively, the time should have been knocked off each sentence.
The first releases sparked an outcry, especially when it emerged that the taxpayer could be left paying pounds 100m in compensation to the ex-convicts. An estimated 5,000 prisoners could have their sentences reduced.
None of the 80 offenders who have already been released will have to return to prison, although this decision will be reviewed if the courts support Mr Howard.
Meanwhile prison governors, concerned that the policy U-turn may lead to rioting among disgruntled inmates in jails in England and Wales, have placed their officers on a security alert, although there were no reports of violence last night.
Harry Fletcher, of the National Association of Probation Officers, said the case was "gross ministerial mismanagement".
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