Although there are a number of examples of prisoners being conscripted or allowed to volunteer for military service in other wars (see some examples here: Penal military unit), instances of this happening in World War I seem to be practically non-existent. The Military Services Act of 1916 does not appear to make any direct mention of prisoners. However, there a couple of 'near' cases worth mentioning.
- Eastern State Penitentiary. After much pressure from inmates, and services rendered in support serving soldiers such as rolling bandages and raising funds,
the inmates’ pleas to
serve seem to have finally fallen on receptive ears. Warden Robert
McKenty stated that men were indeed paroled so that they could serve
in the military. When they returned from the war, the Evening Bulletin
wrote, “they brought wound stripes, service bars, honorable
discharges, a boxful of decorations, sergeants’ and corporals’
chevrons (insignias).” Their service was framed as “winning back their
citizenship” and “making good” after their trouble with the law.
The French Foreign Legion. This probably doesn't qualify, but it's worth a mention as the legion did enlist criminals so it's more than likely that some served during the war. There were also cases in France (for example, in Alpes-de-Haute-Provence - pdf) where civilian prisoners were used in non-military roles.
There is an unsourced reference here to
a regular soldier sentenced to 12 months in prison in April 1914.
Released from Winchester on 6/8/14 "on mobilization. Unexpired portion
of imprisonment remitted."
Assuming the above to be reliable, it is quite possible that there were other such cases, though the above case may be exceptional as the man was already a 'regular soldier' when he was sentenced. There are a couple of other similar, possible examples here.
The fall in the England and Wales prison population during World War I was most likely for the same reason as the fall noted in London. Labour shortages saw workhouses and hostels practically empty as the demand for labour rose. The
...number of men received in the London prisons fell by nearly 63 %
between 1913 (33,776) and 1918 (12,631). The Commissioners of Prisons,
while making a predictable genuflexion to liquor control, concluded
that “the prisons of the country may be largely emptied of the petty
offender when the conditions of labour are such as to secure full and
continuous employment for all…”
Consider also that both prisons and the military were full of young males, and that millions of these men were now in the military and were thus not around to offend on the home front.
As to why governments didn't use prisoners, I can only deduce that there would be the burden of having to prevent possible escapes from the army once prisoners were enlisted. Given that desertion was a significant problem by the time conscription was introduced in Britain, it is hard to see how this added burden would have been welcomed by the military.
Note: I have only searched in English and French. Someone else may have more luck searching in German, Italian or Russian.