Not enough has been done to provide a range of flexible, community-based services suited to individual needs, the commission says in Finding a Place, A Review of Mental Services for Adults, published today.
Andrew Foster, controller of the commission, said: 'Vulnerable people with mental health problems can lead better lives in the community if they receive adequate support. But authorities are struggling to establish an adequate range of services.
'Mental health professionals must co-ordinate their work better and focus on those with the most severe problems.'
But John Bowis, parliamentary secretary at the Department of Health, immediately criticised the report, saying it was unbalanced, failed to recognise the progress made and placed too much emphasis on the importance of the community.
He said it was 'potentially useful' but added: 'The report is unbalanced and has a slant against in-patient hospital services. Hospital services are not in competition - they are not a rival to community care.'
The commission, however, suggests that reliance on hospital services is still too great, despite an earlier statement by Virginia Bottomley, Secretary of State for Health, that the 'pendulum may have swung too far'.
The commission says: 'Others argue that it has not yet gone far enough. They point out that two-thirds of expenditure is still locked up in hospitals and only one-third is available for community care. Who is right?'
It points out that dangerous people are few and do need special attention.
But most schizophrenics are simply quiet and withdrawn and find it hard to cope with the demands of everyday life. In addition, patients said they would prefer community rather than hospital care.
'Common complaints from users are the lack of privacy, the inadequacy of care plans and the lack of contact with professional staff.'
Despite criticisms of the widespread, unplanned closures of beds for mentally ill people, the report says one way forward is to free some of the money tied down in expensive hospital provision.
The problem is circular: without appropriate community support, people become acutely ill and need to be in hospital, so hospital beds cannot be closed to improve provision in the community.
The commission says GPs, appropriately trained, should take more of a central role, and calls for strong leadership to co-ordinate hospital and community health services, local authority housing, social services and employment agencies.
The Audit Commission was established in 1983 to appoint and regulate local government auditors. Its remit was extended to the NHS in 1990. This is its first report on adult mental health services.
Organisations welcomed the report yesterday. Chris Prior of the Mental Health Foundation said one reservation was the implicit idea that there was enough money if resources were reallocated. 'I do not want to detract from the report, but there is this idea of an accountant's dream - reallocate the money and it will all fall into place.'
Dr Arnold Elliott, chairman of the British Medical Association's community care committee, said: 'The Government must now swallow its pride and accept that the mentally ill can only benefit from community care if national standards are set and adhered to.'
Jo Lucas of Mind said: 'We would like to have seen more ideas about how services can be co-ordinated.'
Finding a Place, a Review of Mental Health Services for Adults; Audit Commission; HMSO; pounds 11.
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