In the past year, James Green has tried to burn down his parents' home while they slept inside, repeatedly attempted to hang himself, self-harmed on more than 200 occasions and set fire to his prison cell.

He says an imaginary friend is urging him to kill people and has begged to be sectioned under the Mental Health Act to protect the public and himself.

Yet because James, 24, has been diagnosed with a severe personality disorder (SPD) that is deemed untreatable, he cannot be sectioned and no psychiatric unit will take him.

James is in Gloucester prison awaiting sentence after pleading guilty to making threats to kill. His family has been told that he is likely to be given a community order rather than a custodial sentence.

They are warning that the lack of services for James means that despite a 10-year-history of mental illness and violence towards himself and others, he will be released without any help, medication or support.

Daniel Green, James's brother, said: "We are just desperate. We are worried that this will end in either his death or someone else's. We have warned people but no one seems able to help. It's almost as if he will have to kill someone for anyone to take notice."

James's problems began when he was 14 and living with his parents in Cheltenham, Gloucestershire.

He was first diagnosed with learning difficulties, but his mental health rapidly deteriorated. His brother said: "He was self-harming really badly and tried to hang himself; my mum had to cut him down.

"We tried to get a diagnosis but the psychiatrists kept saying it was learning difficulties. In 2005 he said he had an imaginary friend who was telling him to kill people and himself. One night he set fire to his bedroom in my parents' house and then fled with them inside.

"Mental health services said he was a serious risk to himself and others but there was nothing they could do because he was untreatable."

After the arson attack, James spent six months on remand in prison, where he was diagnosed with SPD, but was still considered untreatable. He was released from jail two days before Christmas with no medication or support.

On Christmas Day, he tried to strangle himself and was taken to hospital. Mr Green said: "James begged the psychiatrist to section him but we were told the same thing; that he couldn't be treated and he hadn't done anything serious enough to be arrested.

"James told the psychiatrist that if he was put back on the streets he would burn down the B&B he was staying in and kill people. That's when he was arrested."

During his time on remand, James set fire to his cell, tried to slash his stomach with a plastic knife and tried to hang himself.

His brother said: "This has devastated our family. My mother and father are ill because of it and James desperately wants help."

James's case is similar to that of Michael Stone, who was diagnosed with SPD that psychiatrists said was untreatable. In 1996, Stone battered Lin Russell and her six-year-old daughter Megan to death on a path beside a field at Chillenden, Kent. A second daughter, Josie, survived despite suffering dreadful injuries.

The case sparked an overhaul of the Mental Health Act in a bid to close the loophole that meant "untreatable" patients could not be detained.

Amendments to the existing Act are making their way through Parliament and include proposals that people with untreatable SPD can be detained if "appropriate treatments" are available, such as supported accommodation, drug regimes and counselling.

However, a report by the charity Rethink has found that the financial crisis affecting the NHS has led to cuts of £30m in mental health services. The charity says the cuts mean that dangerous patients will still be denied the help they need.

Paul Corry, the head of campaigns at Rethink, said: "There are some really good programmes that have helped people with severe and untreatable personality disorders in prisons and in the community but they are few and far between.

"The cuts are already affecting early intervention programmes that are aimed at young people ... and our concern is that the Government is sending a signal that it is OK for trusts to slash funding for mental health and focus on waiting lists.

"The tragedy is that people like James cannot get the services they need until they kill someone. We don't need reform of the legislation; we need investment."

A spokeswoman for the Department of Health said: "The amendments are designed to close exactly this loophole. Appropriate treatment could be anything from counselling to art therapy that would allow a psychiatrist to detain someone. I would be very surprised if anyone still fell through the net." Even if the amended Act is approved, it will not come into force until next year. By then, it may be too late for James Green.

Personality disorder cases

Michael Stone

In 1996, Michael Stone, 41, bludgeoned Lin Russell and her six-year-old daughter Megan to death in Chillenden, Kent. Megan's sister Josie survived with serious head injuries. Stone had been diagnosed with SPD but was told he was untreatable, despite a history of violence. He is serving life in prison.

Alex Crowley

Alex Crowley, 52, stabbed Diego Piniero-Villar, 12, to death in London in 2001. Crowley was known to have SPD and was offered help but refused it and doctors were powerless to detain him. He is serving life in prison.

Daniel Gonzalez

In 2006, Daniel Gonzalez, 25, was convicted of murdering four people in three days in Sussex and London. The trial heard that his mother had begged GPs and social workers to help her son and had warned that he might kill, but mental health services said he was not treatable. He is being held at Broadmoor hospital and is apparently responding to treatment.