Soaring rates of suicide and self-harm in prisons must be dealt with urgently, but it is unclear how the authorities will meet ambitious aims for improving inmates' mental health, the public spending watchdog has said.
In a highly critical report, the National Audit Office (NAO) said prisons had "struggled to cope" as a result of cuts to funding and staff numbers.
A lack of information about the number of prisoners with mental health problems and how much the Government was spending on the issue meant it was "hard to see" whether the taxpayer was getting value for money.
Self-harm incidents increased by 73% between 2012 and 2016 to 40,161 while the 120 self-inflicted deaths in prison in 2016 was the highest figure on record and almost double that for 2012.
The report covered prisons in England and Wales, although issues around healthcare are devolved so the NAO only examined health services provided in England.
NAO chief Sir Amyas Morse said: "Improving the mental health of those in prison will require a step change in effort and resources.
"The quality of clinical care is generally good for those who can access it, but the rise in prisoner suicide and self-harm suggests a decline in mental health and well-being overall.
"The data on how many people in prison have mental health problems and how much government is spending to address this is poor.
"Consequently, government do not know the base they are starting from, what they need to improve, or how realistic it is for them to meet their objectives.
"Without this understanding it is hard to see how government can be achieving value for money."
The report noted the prison system "is under considerable pressure, making it more difficult to manage prisoners' mental well-being" but acknowledged that the Government had promised an "ambitious reform programme" to address this.
The National Offender Management Service (Noms), which was replaced by HM Prison and Probation Service (HMPPS) in April, had suffered funding cuts of 13% between 2009-10 and 2016-17, the NAO said, with a 30% fall in staff numbers in jails over the same period.
"Prisons have struggled to cope with reduced resources," the report noted.
"When prisons are short‑staffed, governors run restricted regimes where prisoners spend more of the day in their cells, making it more challenging for prisoners to access mental health services."
The report said the Ministry of Justice, HMPPS, Department of Health, NHS England and Public Health England "need to address the rise in incidents of suicide and self-harm in prison as a matter or urgency" in order to "avoid preventable fatalities".
The NAO also noted delays in transferring inmates to secure hospitals for treatment, with just 34% of eligible prisoners transferred within the 14 day target in 2016-17.
Lib Dem health spokesman Norman Lamb called for a legal maximum time between diagnosis and transfer for prisoners who need hospital treatment.
He said: "The mental health crisis is threatening the very fabric of our prisons. Too many prisoners with serious mental health problems are being allowed to slip through the cracks, often with tragic consequences."
Professor Pamela Taylor, chair of the forensic faculty at the Royal College of Psychiatrists, said the report showed the "devastating" reality of mental health problems in prisons.
"Much of this can be attributed to mental health problems - prisoners are over three times more likely to suffer from depression, 12 times more likely from a personality disorder and 16 times more likely from psychosis than the rest of the population - yet we don't have the workforce within prisons to treat those most in need," she said.
"Without adequate numbers of well-trained prison officers, for example, psychiatrists who work in prisons cannot even physically access people with suspected mental illness, let alone hope to provide adequate services."
Professor Taylor also called for a reduction in the number of convicts with serious mental health problems being sent to prison.
She urged the Government to put prison reform back on the agenda after the Prisons and Courts Bill, which offered "some progress", was ditched in the snap election.
A Government spokesperson said: "We take the mental health of prisoners extremely seriously, which is why we have increased the support available to vulnerable offenders - especially during the first 24 hours in custody - and invested more in specialist mental health training for prison officers.
"We're putting more funding into prison safety and have launched a suicide and self-harm reduction project to address the increase in self-inflicted deaths and self-harm in our prisons.
"But we recognise that more can be done and continue to work in partnership with HMPPS, NHS England and Public Health England to improve mental health services for offenders at all points of the criminal justice system."