The MoJ is in the middle of a programme of severe budget cuts and central to achieving the 26% savings is ensuring the prison population of England and Wales can be stabilised and, ultimately, brought down.
At the beginning of this year the population increased by 1,000 in a relatively short period which prompted a warning from the then permanent secretary at the ministry that unless demand eased, they would have to revisit their cuts plan. An increasing prison population was described as one of the "biggest risks the department faced".
So the new secretary of state will be told in no uncertain terms by his officials that the name of the game is to keep prison numbers down - not look to lock more people up.
Mr Grayling has very little room for manoeuvre: cuts of £350m to legal aid have been hugely controversial; slashing court and probation budgets still further simply to accommodate the cost of greater incarceration would be extremely unpopular, especially with the prospect of yet more public sector cuts to be announced.
Mr Grayling has said he is a supporter of what's called the "rehabilitation revolution" - looking at ways to prevent reoffending with "more effective" sentencing policies, particularly the use of restorative justice and robust community sentences delivered by the private and voluntary sectors on a payments by results basis.