The lives of England's most vulnerable babies are being put at risk by a critical shortage of intensive care cots and nurses, an inquiry has found.

Demand for intensive care for newborn babies is so great that each of the country's 178 neonatal units had to refuse new admissions on average once a week last year, according to the report by the National Audit Office.

Death rates varied significantly around the country among the 60,000 newborn babies, one in 10 of the total newborns, who required special care. Each unit was short, on average, at least three nurses and fewer than one in four had sufficient staff. Only half provided a 24-hour transport service to ensure mothers and babies who could not be accommodated were transferred to where care was available.

Edward Leigh, chairman of the Committee of Public Accounts, said the report was an indictment of the NHS which was "letting down some of our most vulnerable mothers and their newborn babies".

He said: "It is shocking to hear that the safety of ill and defenceless babies is being compromised by a significant shortage of nursing staff [and] that a mere half of neonatal networks across the country provide a 24-hour transport service to move babies to other units. Even more worryingly, babies are unable to receive the right levels of intensive care because of a lack of cots or overcrowding."

Mr Leigh said services had expanded since 2003, when the country's neo-natal units had been re- organised into 23 local networks and shared the care of babies among them. This was designed to avoid the annual winter spectacle of long-distance transfers by desperate parents scouring the land for a vacant cot for their seriously-ill infant.

But the expansion had not kept pace with demand, up by 5 per cent between 2005 and 2006, because of the growing incidence of premature births, associated with increasing obesity among mothers, their rising age and higher complications among ethnic minorities who now account for a quarter of all births.

Mr Leigh said: "Neonatal units urgently need support from the department and the rest of the NHS to ensure that these weaknesses in the service are addressed."

Karen Taylor, director of the National Audit Office, said most units struggled to deliver an "incredibly high standard of care" with "dedicated staff" against overwhelming odds.

The inquiry was carried out to examine the impact of the reorganisation of neonatal services, following an expert review in 2003, and found that long-distance transfers had been reduced with only 3.4 per cent of babies admitted to units outside their local areas.

But the highly critical report revealed serious shortcomings. Eight of the 23 networks had mortality rates significantly above the average of three per 1,000 live births. The South West Midlands had the highest death rate at 4.8 per 1,000 and Surrey and Sussex the lowest at 1.8. Death rates are higher in deprived areas but grouping units together into networks was supposed to iron out this, Ms Taylor said.

Many units were overcrowded with a third operating above the professionally recommended maximum of 70 per cent occupancy. Three unidentified units were more than 100 per cent full, as measured by the availability of staff.

Across the country one in 10 nursing posts was unfilled and staff shortages were aggravated when babies had to be transferred to other units as a nurse had to travel with them. Charges to primary care trusts varied wildly from an inadequate 173 a day to an exorbitant 2,384. The report also said high occupancy rates could have consequences for patient safety "due to increased risk of infection or inadequate levels of care".

Ms Taylor said: "Overall neonatal units are not meeting the standards set by the British Association of Perinatal Medicine, and the higher the level of care the less the standards are being met."

The report calls for giving urgent attention to staffing and putting the finances of the units on a sound footing.

Sheila Shribman, national clinical director for maternity services at the Department of Health said: "There is nothing more important than the care and support we offer to sick babies and their parents.

"Whilst the UK is one of the safest places to give birth, we recognise there is still more to do. We will be working closely with the health service to look at these services in the light of the issues highlighted in the report, including considering how we respond to its recommendations."

Increase in premature birth

* Around 45,000 premature babies are born each year in Britain and the number is soaring, putting increased pressure on the NHS.

* International studies suggest the boom is being felt worldwide, with a 22 per cent rise in a decade in Denmark and a 30 per cent rise in 25 years in the US.

* The rise is driven by older mothers, increasing obesity and the growth of IVF, which all raise the premature birth risk. Immigration is also a factor. A quarter of all babies are born to ethnic minorities who have a higher rate of complications.

* Births to mothers aged over 40 have doubled since 1986 and the number of women having fertility treatment has trebled since 1991. The proportion of babies born to immigrant mothers rose from 12.8 per cent in 1996 to 21.9 per cent in 2001.