Jeffrey Archer has called for incentives to encourage young prison inmates to improve their education.
The author and peer told the BBC that young offenders who sat exams while in prison should then be considered for early release.
Lord Archer has campaigned for prison reforms after serving a two-year jail sentence for perjury.
He has written extensively about his time behind bars and is publishing a novel about miscarriage of justice.
Paid to learn?
"It would be a good thing... if you said, look, if you come out with three O-levels [sic], we'll let you out a month early," he said.
The former Tory deputy chairman went on to suggest paying prisoners the same to take lessons as they receive currently to clean floors or work in prison hospital.
He said he had been pressing the home secretary, Jacqui Smith, to pay prisoners a flat rate in order to encourage more to learn while behind bars.
"Seventy percent of people in prisons are illiterate", he said. "Wouldn't it be better if prisoners came out being able to read and write.
Perhaps they would have a better chance of getting a job, perhaps that would be a better use of money."
Author of thirteen novels and three volumes of prison diaries, Archer's latest work, 'A Prisoner of Birth', draws on his first-hand experience of life inside and chronicles revenge by a man wrongly convicted of murder.
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