The National Audit Office (NAO) said current plans for prison capacity were "insufficient to meet future demand" amid a projected shortage of 12,400 places by the end of 2027, with costs expected to be at least £4bn higher than initially estimated.
HM Prison and Probation Service (HMPPS) has so far created a third (6,518) of the places in England and Wales it committed in 2021 to deliver by the mid-2020s under the Tories.
Expansion plans in the prison estate are expected to cost between £9.4bn and £10.1bn, which auditors said would be at least £4.2bn more than previous estimates.
The findings, which have been labelled unacceptable by the Tory chair of parliament's spending watchdog, come weeks after the justice secretary, Shabana Mahmood, enacted an early release scheme that freed up 5,500 prison spaces.
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