Up to 50 people a day are sent to jail for non-payment of fines or debts, costing more than it would to keep them in the Shelbourne Hotel, Fine Gael has claimed.
The party's justice spokesman, Mr Jim O'Keeffe, told the Dáil it was "horrendously unfair" that virtually all of the defaulters were poor people.
He introduced a private members' Bill to allow fines to be deducted in instalments from the wages or social welfare payments of fines defaulters, rather than sending them to prison, which should be a "last resort", reserved for "hardened criminals".
The Bill, rejected by 64 votes to 51, echoed similar legislation introduced by the party in 1998.
It too had been rejected by the Government which claimed at the time that its "own version of the proposal was in the final stage of preparation".
But Mr O'Keeffe told the Dáil no legislation had been forthcoming since.
"Fine Gael cannot wait a few years to get into government to make the change because it wants this job done now. If we wait a few years, another 2,000 people will have been jailed under a system sanctioned by the present administration".
He said that Ireland was one of the few countries in the western world that did not have a system for instalment payments. It cost almost €250 a day to keep somebody in prison.
"It is more expensive to keep someone in prison than to keep them in the Shelbourne Hotel."
The cost "of keeping defaulters in prison is about €4 million a year. More than 1,000 are imprisoned annually for failure to pay fines or debts.
"However, when the debtor is freed, the debt remains unpaid. That is a lose-lose scenario on every front."
Mr Fergus O'Dowd (FG, Louth) said that in Britain, the maximum deduction from someone on income support was £2.65; here, the most deducted from someone on social welfare should be one or two euro.
"The current lack of action makes a mockery of the commitment to a caring society. It is time the Government went about looking after its citizens."
However, Minister of State Mr Tom Parlon said the Government "has been extremely active in related areas" and there were two Bills in the legislative programme dealing with fines. The approach in the proposed Bill "could undermine the existing system for payments of fines, and prove vastly and disproportionately expensive to administer".
Mr Parlon said it would place impossible administrative burdens on the courts and the Garda and would not make any significant improvement in pressure on prison accommodation.
Referring to civil debt, the Minister for Justice had consistently maintained that it was "not the primary function of either his Department or the Courts Service in terms of personnel and resources to take on the significant role of operating a debt management service".
The latest prison figures showed that of 3,100 people in prison, 29 were in for failure to pay a fine and eight for failure to discharge a debt, representing 1.2 per cent of that prison population.
Mr Tommy Broughan (Lab, Dublin North-East) backed Law Reform Commission proposals that the principle of equality should apply with increased fines for wealthier offenders.
Mr Ciarán Cuffe (Green, Dún Laoghaire) said it was "madness in the 21st century, that citizens of the State are incarcerated for non-payment of fines", while Mr Aengus Ó Snodaigh (SF, Dublin South-Central) said "the imprisonment of fine defaulters is neither economically nor socially cost-effective".
Mr Seán Ardagh (FF, Dublin South Central) said it was vital that the fines were set at affordable levels, but he said the Fine Gael bill "omits the inclusion of such a provision to ensure basic fairness to the less well-off".
Mr O'Keeffe replied that "the Government's fairness for the less well off is to put them in jail".
