David Cameron has forced Justice Secretary Kenneth Clarke to abandon his plans to halve sentences for offenders who plead guilty early.

The measures, which will be announced by the Prime Minister, also include a tougher stance on knife crime and the scaling back of the controversial indeterminate jail sentences for public protection, reports said.

Increasing the discount for the earliest guilty pleas from one third to a half would encourage more offenders to admit their guilt, saving costs and sparing victims the ordeal of a trial, Mr Clarke said. But Mr Cameron, who said on Monday that his Liberal Democrat partners in the coalition were preventing him from taking tougher actions, is reported to have decided that the moves would have undermined his broader commitment to bring sense to sentencing.

Scrapping Mr Clarke's plans will please the Tory right which accused him of appearing "soft on crime".

But Harry Fletcher, assistant general secretary of the probation union Napo, warned the moves would lead to higher costs and more people behind bars.

The prison population in England and Wales stood at 85,345 on Friday, just 150 short of last October's record high of 85,495. Mr Fletcher also warned that the Justice Secretary would now be left with "a serious hole" in his department's finances.

Prisons and Probation Minister Crispin Blunt hinted last week that further savings could be made from the probation budget if needed. The Probation Service, which is facing cuts of about 15%, had so far been "quite significantly protected" from the 23% budget cuts in the Ministry of Justice, he told MPs.

Roma Hooper, director of Make Justice Work, which campaigns to reform short-term prison sentences, said: "The Government simply cannot afford any more U-turns on its sentencing proposals. Short prison sentences do not and cannot rehabilitate offenders. The Government must stand firm on commitments to improve and increase the number of community sentences, keep offenders with mental health problems out of prison, and move drug-using offenders into intensive rehab programmes in the community.

"Otherwise, not only will they squander millions of pounds of taxpayers' money and pass up the opportunity of a lifetime to fix our criminal justice system, they will lose all credibility as a reforming Government."