Personally, i think it is better that the "optional" low paid work carried out by prisoners should benefit local communities rather than for the benefit of private companies and shareholders looking to profit from "forced" cheap labour.
Even if either public or private sector work for prisoners was forced, then i still think that working in local communities would be a more rational option for society at large and for the prisoners themselves, many of whom havent had the healthy routine of a good day's work in their lives.
There should always be the option of going into education while in prison to learn how to further themselves intelectually and so hopefully having the chance of getting meaningful employment upon release. Other schemes like first aid lessons, cooking lessons and for the unwashed/"working" class/underclass who make up the majority of the prison population, elocution lessons and house training/manners training courses should also be of benefit.
We should not lose sight, however, of the reason they are there in the first place, that these people have commited crimes and are put in prison at Her Majesty's pleasure, not for their own pleasure, so no Playstations, Sky televisions or trips to Disneyland should be on the cards. Not while there are law-abiding people in the country who cant afford to keep the heating going and eat healthly, never mind have these sort of luxurys.