Details of the new prison reform plan will be unveiled by the Chancellor in the spending review on 25 November.

The Home Office hopes to speed through building five prisons by 2020. Cash for the building programme will be raised by closing Victorian jails, many in inner city locations, and selling the land for around 3,000 homes.

These new super prisons would each cost between £270m and £320m, creating a £3bn building programme

Around 10,000 inmates will be moved to the new institutions in an attempt to save an estimated £80m a year.

HM Prison Reading was built in 1844.

The Victorian prison site at Reading, which closed two years ago, will be the first one sold. In London HMP Pentonville and HMP Brixton are expected to be closed, and the future of HMP Leeds in the Armley area of the city hangs in the balance.

It has also emerged that four government departments have agreed to slash spending by around 30% over the next four years.

The transport, local government and environment departments, plus the Treasury, have all agreed deals ahead of the spending review.

Chancellor George Osborne said: “This Spending Review is about reform as much as it is about making savings.

“One important step will be to modernise the prison estate. So many of our jails are relics from Victorian times on prime real estate in our inner cities.

“So we are going to reform the infrastructure of our prison system, building new institutions which are modern, suitable and rehabilitative. And we will close old, outdated prisons in city centres, and sell the sites to build thousands of much-needed new homes.

“This will save money, reform an outdated public service and create opportunity by boosting construction jobs and offering more people homes to buy.”