The prison could house the growing number of Muslim extremist inmates, it is said, after increasing signs of tension at the jails in which they are housed.
But critics said terrorists must not given the appearance of special status within the justice system.
On Sunday, a fire was started in the cell housing Hussein Osman, in Frankland high security prison in County Durham.
Osman was jailed this year for his role in the July 21 bomb plot. He tried to repeat the July 7 carnage by attempting to blow up a train at Shepherd’s Bush, West London, in 2005.
Nobody was hurt in the cell fire, which is under investigation, but officials believe it may have been an attempt on his life.
It was the third incident in three weeks involving convicted Islamic terrorists at the prison.
There are also said to have been death threats against 25-year-old Omar Khyam, who was convicted for masterminding the fertiliser bomb plot and is also serving life for conspiracy to murder.
About 10 per cent of Frankland’s inmates are thought to be Muslims.
Rows are said to have broken out among prisoners about where Muslim prayers should be held on the wing.
Prison insiders claim that the tensions were being made worse by the presence of far right extremists in the same cell block, Channel Four news reported last night. Officials at the newly-formed Ministry of Justice have held private discussions about how to cope if the trend of Muslim inmates continues, Channel Four said.
One option would be to designate a Muslim- only prison where inmates, including convicted terrorists, would be less at risk of attack because of racial or religious tensions.
It would also be easier to cater for their religious needs in terms of diet and prayer.
Lawyers acting for suspected and convicted Islamic terrorists have already called for fanatics to be granted special status in jails as “prisoners of war”.
Last week the controversial solicitor Mudassar Arani, whose firm has been paid more than £1million in legal aid to represent extremists, said her clients feel it is unfair that they must undergo frequent searches and curbs on meeting other imprisoned radicals.
Miss Arani, who claimed she was speaking on behalf of Barot, said: “Why should he suffer? Isn’t it bad enough to have to serve your sentence? Why does he have to be placed in segregation? He asked me to mention prisoner of war status.”
But Tory MP Patrick Mercer, a former Army commander, said: “They are not soldiers, they are not warriors. They have simply broken the law.”
The Prison Service insisted it had no plans for a special Muslim jail.
A spokesman said: “We will continue to treat these prisoners like all other criminals. We will do what is necessary to protect them but we have no intention of creating special conditions for them.”
Prisoners who believe they are in danger can be moved to a Vulnerable Prisoners’ Unit.
The number of Muslim inmates has more than trebled in the last decade.
By the middle of 2005 there were around 7,500 Muslims behind bars – around 12 per cent of all UK prisoners.
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