The number of prisoner escapes has increased as staffing numbers are cut, MPs have warned.
Assaults on staff, suicides and self harm are also up, said the Public Accounts Committee, which raised fears about the "safety and decency" in some prisons.
The MPs were reporting on cost-cutting at the National Offender Management Service (NOMS).
Committee chair Margaret Hodge said £230 million had successfully been saved, but raised serious questions over whether a further £650 million could be found by 2015.
She said: "There is also a risk that reduced numbers will result in staff being taken off offender management programmes to cover duty on prison wings.
"This means that training and rehabilitation activities could suffer, even though we know these reduce reoffending after release.
"The agency needs to seriously consider the long-term consequences of short-term cuts."
Hodge called for a rethink of plans to close older prisons, with the prison population currently at a maximum.
The MPs said levels of risk in some prisons had gone up while staffing levels had been cut.
They added: "We are concerned about safety and decency in some prisons and the fact that more prisoners are reporting that they do not feel safe.
"Assaults on staff, suicides, self-harm and escapes from contractor escorts have all increased."
The committee was told that the number of prisoners escaping from escorts had gone up in 2012, while a category A prisoner had escaped for the first time in 16 years.
A £10,000 reward has been offered for information leading to the return of "extremely dangerous" John Anslow, on the run since he escaped from a prison van in January 2012.
Justice Secretary Chris Grayling said: "Running prisons that are safe, decent and secure is a priority.
"We will continue to drive down running costs by replacing old prison accommodation with new places that are better value for money and provide better opportunities to reduce reoffending."