The government's argument is that prisoners can still use prison libraries or buy books from approved suppliers using their earnings from work tasks. However, libraries are often very limited in the choice they offer, access can be arbitrarily restricted, and their earnings (average £9.60 in 2008 [1]) are likely to be insufficient for book purchases after paying for more essential items.
I agree that this is cruel. It's part of an effort by the government to make prison appear tougher to appeal to its core (right-wing) supporters.