Ministers have dismissed claims that Labour is considering sending criminals convicted in England and Wales to Estonia to serve their prison sentences. The Telegraph reported that the Ministry of Justice (MoJ) was investigating “all viable options” to increase capacity after the Baltic state said it had offered to rent out spare capacity to other countries. Citing government sources, the newspaper said the solution was “on the table” after men’s prisons in England and Wales almost ran out of cells last month with 83 spare spaces. On Friday afternoon, a spokesperson for the MoJ, which oversees the prison estate, said that the plan was assessed by the last government and carries “considerable” and “significant” costs. “The new government inherited a justice system in crisis, with prisons on the point of collapse,” a statement said. “While we are considering all practical options to increase prison capacity and keep the public safe, there are no plans to introduce this measure.” Earlier, Downing Street had also distanced itself from reports. A No 10 spokesperson said renting prison cells in Estonia had been the policy of the previous government and current ministers had made “no such plans or announcement with regard to Estonia”. They added: “More broadly, we would always look at options that are practical and deliver value for money for the taxpayer.” In an overhaul of the criminal justice system, Labour is planning to build more prisons in the long term. Shabana Mahmood, the justice secretary, has also decided to undertake an urgent independent review of sentencing legislation and practice. Official figures published on Friday showed that the prison population had reached a record high, with 88,521 people behind bars, 171 more than the previous record set at the end of last week.The Telegraph reported that Estonia’s low crime rate had left its prisons half empty, prompting hopes that criminals convicted in England and Wales could provide a €30m (£25m) boost to the country’s public finances. Mahmood and Liisa Pakosta, her Estonian counterpart, were expected to discuss prison leasing on the sidelines of a Council of Europe event in Vilnius, Lithuania, it was claimed. Pakosta told the Telegraph: “The UK and Estonia have a history of successful international cooperation, and such a partnership would create further opportunities to benefit and learn from each other.” Sending offenders to Estonia was first proposed by Alex Chalk, the former justice secretary, at last year’s Conservative conference. Labour criticised the idea at the time as an example of Tory incompetence and underinvestment, while the Prison Reform Trust called it “half-baked”. The number of people in prison in England and Wales has risen from about 40,000 in 1991 to more than 88,000, with an increase of more than 1,000 over the past four weeks. Next week, about 1,500 people are due to be released from prison under an emergency measure that reduces from 50% to 40% the proportion of custodial sentences to be served in prison for some. The SDS40 scheme, which will free 5,500 prisoners across two months, will be launched on 10 September for those serving sentences of five years or less. A second category of prisoners – those who have served sentences of five years or more – will be released on 22 October.