Official figures show that almost 3,000 offenders from European Union countries are now being jailed each year, the majority receiving sentences of four years of more for serious crimes.
The number of criminals from the continent being locked up for violence and sexual offences has tripled in recent years.
But so far no prisoners have been sent back under a new scheme intended to repatriate foreign offenders, and only 10 have been returned in recent months under existing arrangements.
The statistics were uncovered in parliamentary written questions by Martin Horwood, the Liberal Democrat MP for Cheltenham who sits on his party's international affairs committee.
He said they show that, at an estimated cost of more than £30,000 to keep one prisoner locked up for a year, Britain could save millions by returning offenders to their home countries under the new scheme.
Mr Horwood said: "This represents a staggering cost to the British taxpayer for looking after prisoners from other European Union countries who are in the UK.
"I think the Government should certainly not be contemplating opting out of the one EU-wide scheme which gives us the possibility of sending these prisoners home to serve sentences in their own country."
The prison population in England and Wales reached 87,583 last month, 98 per cent of the capacity and just a few hundred off the record high set in December.
Of these, more than 4 per cent are now offenders from European Union countries, the new data show, following record immigration in recent years.
Including those from the rest of the world, foreign nationals account for about 12 per cent of the jail population with most coming from Jamaica, Poland and the Irish Republic.
Back in 2002, there were just 1,765 European prisoners but after a decade of steady growth in 2011 there were 3,686. The greatest number (284) were concentrated in HMP Wandsworth.
Separate figures show that in 2002 there were 1,321 EU nationals sentenced to immediate custody but this figure again doubled to 2,696 by last year.
The biggest increases were in violence against the person (196 to 610), sexual offences (84 to 335) and theft (75 to 348). The number jailed for drug offences fell, meanwhile, from 524 in 2002 to 441 in 2011.
Last year 949 EU nationals were sentenced to four years or more behind bars, with a further 722 given sentences of between one and four years, and 367 handed indeterminate sentences for public protection. About 600 were jailed for less than a year.
Crispin Blunt, the junior justice minister, confirmed in a statement that few European criminals are being sent back to their home countries to serve their sentences rather than continuing to impose a burden on British taxpayers.
He said that the EU Prisoner Transfer Agreement came into force on 5 December 2011 and seven member states including Britain have signed up.
Since that date 10 EU nationals have been transferred to other countries' jails but these took place under existing voluntary arrangements, not the new scheme.
So far 24 prisoners have been identified as eligible for transfer and the UK Border Agency is working on their deportation.
Mr Blunt told MPs: "The Government have not made a specific assessment of the number of EU nationals who might be transferred under this agreement. However, we expect to see a steady increase in the number of EU nationals who are transferred as other member states implement the agreement. We are encouraging member states who have not yet done so to implement the agreement at the earliest opportunity."