The bishop to the Prison Service today backed penal reformers' calls for a thorough evaluation of prison privatisation.
The Rt Rev Peter Selby, bishop of Worcester, said the government's policy of encouraging private companies to run jails could raise serious "conflicts of interest".
Dr Selby questioned whether government plans to reduce the number of people in prison might be undermined by the involvement of firms for which a rising jail population would be in their commercial interests.
The news follows the a recent publication by catholic bishops who warned this that overcrowding has stretched the prison system to breaking point, and that new approaches to criminal justice were needed.
The prison population in England and Wales reached a record high of 75,544 last year which is almost double the 1991 figure.
Observers say it is likely to rise over the next decade to around 100,000 as magistrates and judges hand out tougher sentences in response to more prescriptive sentencing guidelines.
The Bishop of Worcester said: "If numbers in prisons need to be reduced - as most agree - is it helpful to create an interest in their growth among companies and their shareholders?
"Are there some real conflicts of interest which we are likely to have to address: for instance, will judges and jurors have to be vetted to ensure that they do not have an interest in sending more people to prison?
"More generally, if prisons become part of the 'commercial sector', do those running them have an interest in reducing regimes or staffing levels in ways that militate against the restorative aims of imprisonment?"
The bishop's remarks came in response to another report published today by the Prison Reform Trust (PRT), which called for an "open and vigorous" debate about prison privatisation.
The report - Private Punishment: Who Profits? - said there was a need to "reassess the merits of prison privatisation and the ethics of large companies profiting from the incarceration of thousands of people".
The PRT director, Juliet Lyon, said: "Even those who believe that ethical or moral considerations about prison privatisation are misplaced or outdated should surely stop and think about the impact of prison privatisation on criminal justice policy and the treatment of offenders."
The general secretary of the Trades Union Congress, Brendan Barber, backed the report, which raises concerns about private companies' lack of accountability to parliament and the public's inability to examine contracts signed with the Home Office.
There are currently 10 private prisons in England and Wales: Altcourse, near Liverpool; Ashfield, near Bristol; Bronzefield in Ashford, Middlesex; Doncaster; Dovegate in Staffordshire, Forest Bank, near Manchester; Lowdham Grange, near Nottingham; Parc at Bridgend, South Wales; Rye Hill, near Rugby and the Wolds at Everthorpe, East Yorkshire. Another private jail is due to open at Peterborough in March.
Church leaders, including the Archbishop of Canterbury, have branded the government's penal policy "scandalous". Rowan Williams accused all three main political parties of "point scoring" in the debate on criminal justice.
Britain's first senior black bishop, the Bishop of Birmingham, has also called for new "restorative justice" approaches to crime and punishment, helping bring offenders and victims together to produce "truth and reconciliation".