The money — $1.48 billion over seven years, Toews said — is the difference between what was allocated to the Correctional Service of Canada for an expected increase in capital expenditures and operational costs due to a predicted jump in the number of inmates, and what is actually needed based on the latest numbers.
The amount is "not savings," Toews said. "We're simply not seeing the increase that was predicted by the opposition nor the increase that was predicted by the CSC."
Toews said the money will be taken out of his department's budget and reallocated under the Finance Department's fiscal framework.
In 2010, officials from the Correctional Service of Canada estimated an additional $1.5 billion was needed to deal with a prison population estimated to grow to 17,725 by June 30, 2012. In fact, the federal prison population as of that date was 14,965, an increase of about 765 since 2010 and "significantly" less than expected, Toews said.
That number is below the current federal capacity of 15,000, which will grow with the completion of 2,700 new beds being built in men's and women's facilities, Toews said.
The union that represents federal prison guards said Toews's announcement is premature, in part because the government's recent omnibus crime bill, C-10, only passed this spring.
"There's a slight delay before you actually see impacts" from legislation, said Jason Godin, the Ontario regional president with the Union of Canadian Correctional Officers.
"That's the part that's scary," Godin said. "This government continues to put the cart before the horse. We're very worried by that."
Toews said the main reason for the lower-than-expected inmate numbers is that the government's tougher sentencing provisions have targeted repeat offenders and kept them in prison longer, instead of bringing in more new inmates.
"These are people who are sentenced, get out of prison and are re-sentenced again," Toews said. "We've been noticing there simply aren't that many new individuals.
"There simply aren't that many really bad criminals out there," Toews said.
One prisoners' advocate said Toews's announcement was "beyond disingenuous."
"The numbers of prisoners is increasing and the crime rate has not been impacted by the legislative changes," Kim Pate of the Elizabeth Fry Society said in an email to CBC News. "Furthermore, some of the most significant changes are just now coming in to force, so we are not likely to experience the full impact of legislative and policy decisions yet
"Are we really expected to believe that more people in prison for longer periods of time is saving us money or keeping us safe? All evidence, especially from the U.S. experience, proves otherwise," Pate said.
The provinces have also argued that the federal government's omnibus crime legislation will download inmates and costs to provincial facilities.
Toews acknowledged there will be some increase in the prison population due to the passage of the recent legislation. But, he repeated, it will be "nowhere near" what was predicted, and argued that keeping prisoners in jail to serve more of their sentences could save the provinces and municipalities court costs associated with recidivism.
Toews said the current inmate numbers and the 2,700 new beds being added at existing facilities, at a cost of $600 million, gave him the flexibility to announce earlier this year the closure of Kingston Penitentiary in Ontario and the Leclerc Institution in Laval, Que., plus the relocation of Kingston's Regional Treatment Centre, at a saving of $120 million a year.