The vessel off the Dorset coast currently holds 400 inmates

The government purchased it in 1997 as a temporary overcrowding measure and intended to close it in 2000.

Weare, originally a troop ship in the Falklands war and then a floating jail in the US, had been heavily criticised in prison service reports.

The vessel's seaworthiness certificate is due for renewal next year and "substantial investment" would be necessary to keep the ship operational, a Prison Service spokeswoman said.

Last year Anne Owers, the chief inspector of Prisons, criticised conditions on the Weare and said it should be closed down unless a huge amount of money was spent on refurbishment.

Mark Leech, editor of the Prisons Handbook, welcomed the decision to close the ship and said: "The Weare is a relic of a bygone age.

"It should be emptied, towed out to sea and sunk."

Prisoners will be reallocated to other prisons in the South West or, where appropriate, closer to their home area, the spokesman said.

'Necessary' decision

But Brian Caton, general secretary of the Prison Officers' Association, said: "We would urge the Labour government to look more seriously at how they are going to manage rising prisoner population while at the same time taking prison places out of commission."

Many of the 200 prison officers on mobile contracts will be moved to other jails while others will be offered early retirement and given the chance to take redundancy. Prisons minister Paul Goggins said everything possible would be done to avoid compulsory redundancies. Martin Narey, chief executive of the national offender management service, said: "Staff will know the level of investment necessary to keep the prison open. "The decision to close the Weare was not an easy one, but it was necessary. "They have made the best of an unsuitable facility and kept the prison working effectively for seven years when we anticipated using it for only three."