At last, a Chancellor with the vision to offer hope to young offenders

In a passage from his Budget speech about tackling unemployment yesterday, there was a great moment. Gordon Brown delivered some words that not many people will have registered among the announcements about business tax and the funding for the war, but they will transform scores of lives none the less.

"Some of the hardest to help into work are young offenders – 70 per cent of whom reoffend," he explained. "So the Home Secretary and the Minister for Work are now seeing how we can apply nationwide – under the leadership of Sir John Parker of Transco – the successful Reading training-for-work programme."

The Reading project might seem unglamorous. The company National Grid Transco (NGT) needs 3,000 people to train as gas engineers who can replace pipes – and it has taken the brave, socially responsible decision to recruit from our large (and growing) imprisoned young offenders' population. NGT, with the Prince's Trust charity, funds the extensive programme that equips prisoners with a qualification to enter the industry once they are released. It has an extraordinary 78 per cent success rate. And not only are the offenders equipped with skills: the company provides pre and post-release mentoring of the trainees by an employee in the gas industry to help them stay on track. So far, not one of the young offenders who completed the training have reoffended – compared with the 60 per cent reoffending rate in the wider population.

I visited a similar, excellent pilot scheme for young offenders last year in Aylesbury young offenders' institute, which houses the 348 most violent and disturbed young criminals aged between 18 and 21 in Britain. Toyota, without government funding, built within the institute a very sophisticated car mechanics' workshop which at any given time provides 24 prisoners with skills that are transferable to the outside world – and a life beyond crime. The company is committed to funding the workshop for the next 20 years. "It kind of gives you hope," Steve, one of the offenders, explained. "It makes you realise you can learn something, you know? It makes you realise you're not thick or just a piece of shit."

Many students on the course have to be taught how to read and write before they begin. The prison officers proudly displayed a letter from a former inmate, explaining that he is now employed full-time by Toyota, and that the mechanics course transformed his life.

The example of Aylesbury's Toyota workshop suggests that government funding for this kind of project would be an investment that paid for itself many times over. Every one of the offenders now in jobs rather than committing crime is not draining away huge sums on lawyers, court time and expensive prisons; indeed, the opposite is happening: each is paying taxes.

"We would love to have workshops all over the prison. We would love to be educating the lads in a whole range of crafts," one prison officer, Neil Beales, explained. "But we don't have the manpower. We do''t have the resources." This Brownie centre-left approach – giving young offenders who are mostly illiterate an education and access to economic opportunity – is the sensible alternative to the dreadful Straw-Blunkett-Howardism that is still spouted all too often by the Government.

These self-conscious "hardliners" are also absolutely right that some cosy ultra-libertarians do not have any understanding of the lives that crime (often "petty") committed by these offenders wreaks across the council estates of Britain. But understanding that suffering doesn't give us a licence to adopt foolish tabloid-style gestures such as marching people to cash machines or introducing headline-grabbing legislation that will never be used by police.

No, it should redouble the Government's commitment to taking the moves announced yesterday that actually will reduce the crime those people endure: the Reading scheme is the way forward. Law and order has been the single largest area where the Government has consistently misplayed its hand; it is the only government department where the cynical view of New Labour – that it is all based on spin and headlines, not results on the ground – is sustainable.

Yet Mr Brown's attempt to challenge this is hindered by the fact that he has yet to back the extension of these schemes with more hard government cash. If he is serious about delivering on the old slogan, "Tough on crime, tough on the causes of crime", then there needs to be a radical transformation in our prisons, which are too often a national disgrace.

Every prison, rather than an exceptional handful, should have facilities to offer retraining and re-education. (This also usefully tackles our problems with skill shortages). This isn't possible while they are stuffed to over-capacity: since the current "tough" folly began in 1993, the prison population has increased from 42,000 men, women and children to 72,000. Lying below the figures Mr Brown discussed yesterday for law and order, there was the terrible waste of money that these figures involve.

But, worse, overcrowding is undercutting the excellent retraining programmes that Mr Brown discussed in the Budget: in 2001-02 the Prison Service failed to meet its own target of providing prisoners with at least 24 hours of purposeful activity a week. Only three out of 40 of the male local prisons, which suffer the worst overcrowding, managed to meet this target.

If the noble aims announced by Mr Brown are to have any real meaning, more money needs to be found quickly – and reducing the absurd numbers of people in prison (the highest proportion in Europe) is the best way to do it.