The £1bn building work will be paid for by closing old Victorian prisons in city centres and selling the sites for housing.
Under the 'new for old' plan, more the 3,000 new homes could be built on old prison sites. The Victorian prison site at Reading, whose closure was announced in 2013, will be the first to be sold.
The Department of Justice expects to save £80m a year in running costs because new buildings are cheaper to run than old ones.
Five of the new prisons will be open by 2020, ministers say. This is in addition to the new prison being built at Wrexham, and expansions to existing prisons in Stocken and Rye Hill.
Justice secretary Michael Gove said: “This investment will mean we can replace ageing and ineffective Victorian prisons with new facilities fit for the modern world.”
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 And we will close old, outdated prisons in city centres, and sell the sites to build thousands of much-needed new homes.
“This will save money, reform an outdated public service and create opportunity by boosting construction jobs and offering more people homes to buy.”
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