Sir David Ramsbottom called for a more aggressive approach to deal with the drug problem than the one currently taken by the "chaotic" prison service.
"I do not see how it can be allowed," he told a home affairs select committee. "If the prison staff claim they don't know who they are, I don't actually believe them, because all the prisoners know. It is easy to find out and if the staff don't know, they jolly well should know."
Over a two-hour period, during which some MPs gasped as they listened to his evidence, Sir David painted a grim and depressing picture of the state of Britain's jails. He told MPs:
t The prison population now stood at a record 65,000, a figure he described as "horrendous" and a rise of almost 25 per cent in just over two years.
t Some 30 or 40 per cent of young offenders need not be in prison at all.
t Around 20,000 of the 65,000 prison population had some mental health problems.
Yesterday Tony Pearson, the deputy director-general of the Prison Service, said he was astonished at Sir David's comments. "We recognise that there is still a lot of work to be done ... But the Prison Service deserves credit for its excellent performance in housing safely and securely the unprecedented rise of 6,000 in the population over the last 12 months.
"There have been real improvements in preventing drugs getting into prisons and dealing swiftly with prisoners found using illicit drugs."
Harry Fletcher, assistant general secretary of the National Association of Probation Officers, said: "Drug-dealing is a major problem in Britain's jails. Last year, more than 1,000 visitors were arrested trying to take drugs in. This is a five-fold increase on 1992."
Mark Healy, national chairman of the Prison Officers' Association, said: "Clearly, there is a major drugs problem within the Prison Service, we've been saying that persistently for the last 10 years."
A convicted fraudster is earning pounds 600-a-week from an outside job despite still being in prison, it emerged yesterday. Graham Etson, a prisoner at low-security Wealstun Prison, near Wetherby, West Yorkshire, got the job - believed to be in financial services - as part of a resettlement programme intended to help inmates return to civilian life. He also has a company car which he is allowed to use five times a week for business trips to York.Reuse content