Just one criminal goes to prison for almost every 100 crimes that are committed sparking fears millions of offenders are escaping tough punishment.
Fines may never be paid.
Those jailed last year made up just eight per cent of all offenders convicted in the courts while hundreds of thousands more never appeared before a judge and were handed a caution, fine or other out-of-court punishment.
Many more criminals are never caught and brought to justice.
It comes at a time when there is growing concern that the criminal justice system is fuelling a â€œrevolving doorâ€ of offending.
In May it emerged that serial offenders stand the lowest chance in a decade of being jailed while thousands more are let off with cautions.
And figures in October showed one in four criminals went straight back to crime after completing their punishment, whether prison or in the community, and were responsible for more than half a million new offences last year.
However, Kenneth Clarke, the Justice Secretary, is hoping to cut the prison population by 3,000 within three years as part of his sentencing and rehabilitation reforms.
Victims groups last night said it meant numbers being sent to prison is likely to fall but crime will not.
A total of 9.7 million crimes were committed in England and Wales during the 12 months to June, according to the official British Crime Survey.
During the same period, the courts convicted 1.3 million people, of which 102,000 received an immediate custodial sentences for their crime, the Ministry of Justice figures show.
It means just one criminal went to prison for every 95 crimes committed â€“ or one per cent of all offences. It has risen since 2010 when is stood at one criminal jailed in ever 93 times.
Hundreds of thousands were given a suspended sentence, community order, court fine or other disposal such as conditional discharge.
Almost 450,000 other offenders never reached the courts and were given an out-of-court punishment instead.
Lyn Costello, of Mothers Against Murder and Aggression, said: â€œThese figures mean hundreds of thousands of criminals are either getting away scot free or being handed soft penalties.
â€œI get shocked daily when I hear about some of the sentences being handed out for what are violent crimes.
â€œAnd with Ken Clarkeâ€™s plans to send fewer people to prison then lets see when numbers go down whether crime goes down as well. I doubt it very much.â€
The number of people receiving custody actually increased by 2.4 per cent compared with the previous year but those given a suspended sentence increased by five per cent.
However, ministers will seize on figures that suggest the custody rate is increasing at a time when out of court penalties are in decline â€“ a fall of 10 per cent last year.
The Government is currently reviewing the use of such punishments amid fears they are being overused and people suspected of serious offences are avoiding court.
Kenneth Clarke, the Justice Secretary, has repeatedly said too many criminals are sent to prison and that tough alternatives should be used more.
Last year he said he expected the prison population to drop by 3,000 by 2014 as a result of planned reform of sentencing and rehabilitation policies.
That will effectively result in tens of thousands fewer criminals going to prison than previously would have done.
Under the spending review, and allowing for inflation, the MoJ will see budget cuts of Â£2.5 billion over the next four years.
Just one criminal goes to prison for every 100 crimes