The Ministry of Justice has launched a crackdown on compensation claims lodged by prisoners across England and Wales.
Almost 14,000 individual payments were handed out to inmates in the past year, nearly double the number made the year before.
The department said litigation costs had now reached £29m and varied from claims of racial discrimination to being bitten by a rat.
Justice Minister Dominic Raab said: "Of course the Prison Service must be accountable, but taxpayers will be staggered to learn that the costs of litigation against it reached £29m last year.
"We have ordered an independent audit to make sure we are not being taken for a ride. We want public money focused on protecting the public and reforming offenders."
Recent claims against the Prison Service include the case of Michael Adebolajo, convicted of murdering soldier Lee Rigby outside his barracks in Woolwich, south-east London in May 2013.
Adebolajo is seeking £20,000 following an incident at Belmarsh high security prison in July 2013.
He claimed he was assaulted by five prison officers who knocked out two front teeth.
The officers have been told they have no case to answer but Adebolajo's compensation case is still ongoing.
Another convicted terrorist tried to claim more than £1,200 for an invasion of his privacy.
Abdulla Ahmed Ali, serving life for a plot to blow up transatlantic airliners with liquid bombs, sued for compensation.
It followed an allegation that two boxes containing his personal possessions, including legal mail, were opened, searched and removed in 2013.
His case was dismissed, but like many such claims, the Ministry of Justice (MoJ) had to invest thousands of pounds in defending itself.
Another case earlier this year caused outrage, after a convicted three-time killer successfully sued for compensation twice in as many years.
Kevan Thakrar is serving life for the murder of three fellow drug dealers in Hertfordshire in 2008.
In January this year he was awarded £1,000 from the MoJ after a judge ruled that a guard squirted shampoo on the Thakra's CDs during a prison transfer.
The 27-year-old was awarded more than £800 by the same judge in 2014 after items including his nose hair clippers were damaged in jail.
In another unusual case, a prisoner is set to sue for compensation after claiming he was bitten by a rat.
Chire Henderson, an inmate at HMP Bullingdon in Oxfordshire, a 1,100-capacity prison, said he was bitten by the rodent inside his cell.
If successful, he could be in line for several thousand pounds in compensation.
Figures show that in the last financial year, £28.8m was spent handling claims. That figure includes damages, legal advice and legal representation in cases that made it to court.
For the same period the year before, the overall figure was £21.1m.
Steve Gillian, General Secretary of the Prison Officers Association, said the MoJ crackdown on compensation claims was long overdue.
He said: "The POA welcome any tightening up of spurious compensation claims as some of the settlements to prisoners have been ridiculous.
"Most claims are frivolous and the MoJ and Government should remember tax payers money is not their money and they should stop playing fast and loose.
"Ironically the MoJ appeal even to the Supreme Court when a member of staff is claiming injury, yet they appear to want to settle every claim a prisoner makes"
The Ministry of Justice has now commissioned a top law firm to carry out an independent audit of thousands of recent claims to determine the best way of cracking down on bogus and illegitimate claims.
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