Psychiatric wards are unable to provide patients with acceptable levels of security or care, a report warns.
Services were described as 'inexcusable'
The Mental Health Act Commission said there was intense pressure on beds, understaffing and a lack of basic humane treatment.
The report was based on visits to detained psychiatric patients in all hospitals in England and Wales between 2003 and 2005.
It calls for the government to improve psychiatric inpatient services.
The MHAC, which monitors the implementation of the Mental Health Act as it relates to patients detained or liable to be detained, said too many patients are fearful of mental health services.
Too many people are also fearful of those with mental health problems, it said.
The report found over half of all wards are full or have more patients than beds, with staffing shortages and unpleasant ward environments undermining the therapeutic purpose of in-patient admission.
It warned the extension of patient 'choice' across health service provision may disadvantage patients unable to exercise choice because of their mental incapacity or because of legal powers of compulsion held over their treatment.
The report also said the criminal justice system works to the detriment of people with mental health problems, often treating them as criminals, rather than seeking to offer them appropriate care.
It called on the government to review the role of the Home Office in decisions about mentally disordered offenders.
Chris Heginbotham, MHAC chief executive, said: "Mental Health Act Commissioners find serious abuses of the rights of patients every week - which in 2006 is simply inexcusable.
"We are especially worried about complacent and often lax use of the Mental Health Act; some provider attitudes demonstrate a lack of understanding of the significance of depriving a person of their liberty."
Professor Kamlesh Patel, MHAC chairman, said: "The NHS should provide reassurance to everybody that they will receive appropriate and dignified care if they fall ill.
"But it is in this respect more than any other that mental health services are failing to match the standards of the rest of the NHS."
Marjorie Wallace, chief executive of the mental health charity Sane, said: "This report paints a damning picture of psychiatric wards, revealing that some are unable to provide patients with acceptable levels of security or care.
"It highlights intense pressures on beds, understaffing, and lack of basic, humane treatment; staff and resources have been siphoned off to the more fashionable community services.
"In our own experience, many units are places of squalor and degradation. "There has been an alarming increase in illicit drug taking and violence on wards, leading to an atmosphere of fear where both staff and patients can feel under threat."
The report is the second in month to outline problems in NHS psychiatric units.
A collective of leading health and social care groups called for radical changes tube made to mental health services in England over the next decade.
A Department of Health spokesperson said the report's recommendations would be studied in detail, but stressed the government had already earmarked new funds to improve services.
"Improving and updating inpatient care for the small number of people who suffer from acute mental problems is a major priority for the Department of Health.
"We have put in place a comprehensive action plan to stamp out inequalities and discrimination in mental health services."