The Independent on Sunday can reveal that a controversial measure for "queuing" criminals, even burglars and people convicted of violent assault, is one of a raft of proposals being considered by Mr Reid.
The move comes amid mounting chaos over prison overcrowding, putting Mr Reid at the centre of a political storm and a worsening row with the judiciary over convicted criminals avoiding jail because of the crisis.
In a damaging new blow to Mr Reid, critics last night dismissed the waiting list idea as a "desperate measure" to get the Government out of a "desperate situation". David Davis, the shadow Home Secretary, said Mr Reid was being forced to consider such measures as waiting lists because of a failure to foresee the "obvious consequences of their inadequate prison process".
"There will be a temptation for people on this extended bail to go out and offend again as they will not have been through the deterrent or rehabilitation process," he said.
Frances Crook, from the Howard League for Penal Reform, said offenders should either be in custody or serving a community service order.
"It's very simple. I don't know why John Reid hasn't got that yet. There is a moral and intellectual vacuum at the heart of policymaking."
Harry Fletcher, from the National Association of Probation Officers, said a queuing system for offenders would provide extra places in the short term, but it would not be popular with the public.
"If this was handled properly this could help solve the short-term problem of what to do with people but it would require a lot of management. The Government was warned repeatedly that this [overcrowding] would happen if they did not build more prisons or take a more liberal approach to sentencing."
The move came after judges reacted with anger to a plea from the Home Secretary not to jail low-risk offenders because prisons were close to capacity.
Yesterday, the Lord Chief Justice Lord Phillips stepped in to calm the growing row between the judiciary and Mr Reid, declaring it was "appropriate" for judges to consider the state of prison overcrowding when passing sentence.
The overcrowding crisis has been blamed on a failure by the Government to heed warnings that more prisons are needed, and an overly tough jailing policy by the courts in response to Tony Blair's "tough on crime, tough on the causes of crime" policies.
The jail population currently stands at just under 80,000 and prison service sources are warning that it could soar to more than 83,000 by this summer.
The waiting list scheme is based on similar systems used in Scandinavian countries as well as Poland, where as many as 40,000 criminals are currently on waiting lists, in an effort to keep prison populations down.
Those who have been convicted by the court are placed under supervision in the community and have to report to a police station once a week until their name comes up for a prison place.
Offenders could be kept in a queue for as long as three months before being given a prison place.
Last week, the prisons watchdog warned in an interview with this newspaper that public safety was being put at risk because of the overcrowding crisis.
Anne Owers, the chief inspector of prisons, said that resources were being stretched so thinly that programmes to rehabilitate inmates so that they do not commit further crimes were being compromised.
The current prisons overcrowding crisis is a direct consequence of the Government's own policies, as Mr Reid admitted on Friday.
The Home Secretary said that the Government had failed to anticipate how quickly the prison population would grow as a result of tougher sentencing.
"It is a mistake not to forecast that we would require a larger number of prisons than we have got at present, by putting away a greater number of dangerous offenders for a longer period," he told Channel 4 News.
The number of prison places has increased by 17,000 since 1997. But that expansion has been outstripped by the dramatic 90 per cent increase in the number of prisoners in England and Wales since 1993.
As long ago as 2000 the Treasury announced a wide range of measures following a review of the criminal justice system. These included an extra £2.7bn by 2004 "to drive up performance across the criminal justice system, resulting in an increase in the proportion of recorded crimes for which an offender is brought to justice".
There was also £160m a year, for three years of crime reduction programmes with targets to "cut vehicle crime by 30 per cent by 2004; domestic burglary by 25 per cent by 2005; and robbery in our principal cities by 14 per cent by 2005".
The then Home Secretary, Jack Straw, said: "Offending is too often associated with abuse of drugs and alcohol, having truanted from school or having been in care. By getting Whitehall departments working together, we can win the war on crime."
Attempts to slow the growth in the prison population through the introduction of tagging schemes and other non-custodial sentences proved far less successful than ministers had hoped.
Then new laws that came into effect in 2005 introducing indeterminate sentences for the most violent crimes placed yet more pressure on the system.
No country in Western Europe jails as high a proportion of its citizens as England and Wales, where 143 out of every 100,000 are currently serving time.
Today's figure of just under 80,000 is projected to grow to 106,550 by 2013 if current trends continue.
In November last year the Howard League for Penal Reform warned that the prison system was facing a crisis.
It painted a bleak picture of life in overcrowded prisons, where suicide is a weekly occurrence, violence is rife and drugs are plentiful.
Frances Crook, the director of the Howard League, said then that prisons were failing to protect the public. "The majority of people released from prison commit further offences, whereas community sentences can reduce reoffending by 14 per cent," she said.
"Reoffending by prisoners will increase as prisons are unable to cope with the sheer number of people."
Mr Reid will attempt to regain the political initiative over the issue tomorrow with a speech on penal policy to be delivered in Liverpool.
The publication the next day of Her Majesty's Inspectorate of Prisons annual report will keep the focus firmly on the issue.
The latest crisis to hit the Home Office comes as the Home Secretary is preparing to present to Cabinet this week his long-awaited review of Britain's counter-terrorism strategy.
Last weekend he encouraged speculation that it will recommend the creation of a separate department dedicated to protecting Britain from terrorist attack.
The review has caused serious internal cabinet turf wars between Margaret Beckett, the Foreign Secretary, and Ruth Kelly, the Communities Secretary, whose respective departments face losing responsibilities.
Mr Reid is said to want to remove responsibility for MI6 from the Foreign and Commonwealth Office. He also wants to remove work on tackling Muslim extremism from the Department for Communities and Local Government.
One senior official said: "This looks like a land grab from Reid who wants to walk away with a Cabinet seat and the security and intelligence services and leave prisons and police behind."
HMP Overflow
Severe prison overcrowding in England and Wales has led to a number of emergency proposals by the Home Secretary, John Reid. Measures include the purchase of ships rented from oil companies to be moored offshore and adapted to house hundreds of convicted criminals in place of oil rig workers.
Prison ships
The purchase of two vessels is being negotiated as the prison population approaches 80,000
Military camps
An unidentified RAF camp in northern England will be used to house prisoners, Dr Reid announced on Thursday
Police cells
Around 480 prisoners are being held in police cells which are designed for short-term use only
Psychiatric wards
Thousands of mentally ill prisoners would be better treated on secure hospital wards than behind bars
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