My hunch is that the recent panic over bail and the vilification heaped on judges and magistrates who grant bail that goes wrong will have just tipped the decision towards custody in enough cases to push the numbers past the previous record.
Here's the Lord Chief Justice's response:-
Message from the Lord Chief Justice to the Magistrates' Association (22 February 2008)
Prisons and Sentencing story in the Guardian
"I have read the report in the Guardian of the message sent to you by the Lord Chancellor. I can well understand his anxiety, having regard to the severe pressure on prison places, to emphasise the importance of not imposing a custodial sentence in circumstances where the nature and context of the offence permit an alternative disposal. This is, of course, no more than the law requires.
I have spoken to the Lord Chancellor and can confirm that it was not his intention to suggest that custodial sentences should not be imposed if the circumstances of the offence are so serious that a fine or community disposal cannot be justified. As the Lord Chancellor and I have always made clear, it is not for him or me to give directions as to how Judges and Magistrates should exercise their sentencing discretion. "
Here is the Guardian piece
If you listen carefully, you can hear the sound of chickens coming home to roost.