Monthly prison newspaper Inside Time has revealed that under the new contract, beginning in October 2008, DHL and Booker will rationalise the products available to prisoners to a range of 750 product lines, from tuna tins to stamps and phone credit. The new list, down by approximately 300 items from the previous list provided by Aramark, will affect 80,000 prisoners.

According to the Prison Service Order 4460, all prisoners who participate in "purposeful activity" must be paid. Their rate, however, is not subject to the national minimum wage (£5.52 an hour). The average pay in UK prisons is estimated at £9.60 per 32-hour week, or 30p an hour. There are no figures for how many prisoners earn money in total but the prison workforce is estimated at 10,000 people in 370 workshops.

Many big companies are known to have exploited prisoners' cheap labour to produce their products, including Sainbury's for packing their plastic spoons and Virgin Airways for packing their entertainment headphones. Inside Time has recently revealed that the previous prison canteen supplier, Aramark, used Category D prisoners at HMP Blantyre House in Kent to pack canteen supplies for all Kent prisons. This is something that has reportedly been happening in a number of other prisons, including HMP Shepton Mallet in Somerset.

Some 4,000 prisoners also work for Contract Services packing and producing goods for some 370 private customers, generating £6.1m in revenue in 2007/08. Earlier this year, the Ministry of Justice finally admitted, following a Freedom of Information Act request lodged by the Campaign Against Prison Slavery, that part of Contract Services' role is to produce revenue to offset the costs of imprisonment, something the ministry seems to have been loathe to admit previously.

Last month, Corporate Watch also reported that detainees at Campsfield House immigration prison in Oxfordshire, which is run by Global Expertise in Outsourcing (GEO), are being paid £5 for six-hour shifts of cleaning and kitchen work (www.corporatewatch.org.uk/?lid=3133).

Joe Black from Campaign Against Prison Slavery (CAPS) said: "The government and prison authorities maintain that the prison system exists not only to protect the public and maintain civil order, but also to rehabilitate offenders through education and training. But how can some mind-numbing activity such as packing tap-washers into packets of four or putting greeting cards into cellophane wrappers for up to 10 hours a day, week in week out, ever be constituted as holding any skill-training value?"

Campaigners argue that the British government, in its efforts to build up a prison-industrial complex based on the US model, needed to "subdue and coerce this captive workforce into a compliant state." Part of this was introducing the Incentives and Earned Privileges (IEP) scheme in 1995, which encouraged "hard work and other constructive activity" by introducing a system of privileges that are "earned by prisoners through good behaviour and performance" and are "removed if they fail to maintain acceptable standards." Under Rule 8, even the right to possess tobacco and to smoke is an 'earned privilege', which can be taken away for breaking any of the myriad prison rules listed in the Prison Discipline Manual.

The scheme, which was partly a response to prison rebellions and riots in the 1970s and 80s that provoked a radical restructuring of the prison control and discipline system, has also proved an essential tool in the industrialisation of British prison labour. At the core of the scheme was the concept of paying prisoners "to encourage and reward their constructive participation in the regime of the establishment." Pay rates vary depending on resources, the amount and type of work available at each prison, and the level reached on the IEP scheme. At present, the minimum wage is £4 per week, as it has been for the past 18 years. Prisoners willing to work but unemployed because no work is available get £2.50 per week. Most of the work available, by the authorities' own admission, "provides little training, qualifications or resettlement activities for prisoners."

According to Inside Time, the Prison Service team responsible for the new re-contracting arrangements apparently had "no choice but to continue working independently with contractors," as supermarket chains like Tesco and Sainsburys were "not interested" in supplying prisons - the spending of the whole prison population is said to be equivalent to 50% of one typical Tesco convenience store. So the new service was designed on a hub-and-spoke model, similar to the way parcel courier services work. In the plan, ten or twelve prisons were to be designated as distribution hubs, each responsible for supplying a specific number of prisons (the spokes) in their particular geographical area. Deliveries would come directly to the hub store and prisoners would be 'employed' to pick and pack consignments for the neighbouring prisons. A "positive element" of this was seen as the additional "work opportunities" for prisoners in these picking and packing units.

DHL is a Deutsche Post World Net brand and employs some 300,000 people across the world. In 2007, the multinational generated revenues of more than 63bn Euros (£49.8bn). Booker is the UK's largest cash-and-carry operator, with 172 branches across the country. In June 2007, Booker reversed into Blueheath Holding Plc to form Booker Group Plc. Their total sales in 2007/8 were £3.1bn, with operating profits increasing to £46.1m.