It is estimated 90 per cent of all inmates in jails and young offender institutions have at least one mental health condition.
The Government wants to shift vulnerable people arriving at police stations and courts towards securer hospitals and it announced an extension of this “early diversion” scheme on Friday.
However, a post-code lottery often dictates whether beds are available in acute units.
Mr Hardwick, 54, applauded the initiative but warned actions would count.
He said mental health had been for far too long the backwater of criminal justice policy.
The lack of progress struck him when he visited High Down Prison in Banstead, Surrey, last year.
It was built on the site of the former Banstead Lunatic Asylum, close to where he grew up and he was moved by how little had changed.
He said: “Many of the people there were the same as those held in Banstead all those years ago because we can’t seem to think of something better to do with them.
“We’ve gone backwards.
“I’d understood there are people with mental health problems in prisons and I’d understood that intellectually, but what I hadn’t been prepared for was the scale, the proportion and how visible and obvious it is.
“If you said to me, ‘Are the sorts of people we’ve talked about safe in prison?’ they definitely are not if you are mentally ill.”
He said one of the saddest aspects of his job was dealing with letters from the mothers of mentally ill prisoners.
He said: “If you were a mum, it would be your worst nightmare if your son or daughter has developed a schizophrenic illness and they’re struggling to look after themselves and where they end up is not the hospital they need but Wormwood Scrubs or Wandsworth Prison where they’re getting into more trouble, then segregated and getting bullied.
“You’d be at your wit’s end.
“The fundamental problem is not medical care, the fundamental problem is the environment they’re in.
“Prison couldn’t be a worse environment for people with mental health problems.
“It’s frightening, it’s stressful, a lot of time is being isolated, you have little stimulation.
“You couldn’t think of a less therapeutic environment than a prison if you designed it.
“The mums are right to be worried.”
Mr Hardwick said all prison officers should be trained in mental health issues so they could spot telltale signs of depression and other illnesses before they develop into serious harm or suicide.
Currently, training programmes are left to individual prison governors, but Mr Hardwick wants a national policy.
He had been impressed by a recent inspection of New Hall women’s prison in Wakefield, Yorkshire, where 90 per cent of officers had undergone mental health training.
He said: “I think all prison officers need to be trained to at least a basic level in identifying and dealing with people with mental health problems.
“Where there’s a lower level of training, people don’t understand the behaviour that’s being demonstrated, so they just write off prisoners’ behaviour as being troublesome and bang them up in a cell.
“Training would be better for the prisoner, better for the officers and if that means you can do something more productive with the prisoner when they’re there, it’d better for the public as well because we all want them to be less likely to commit offences when they leave prison.”
He was most concerned about “poor copers”, those prisoners who are quieter and more isolated.
He said: “The noisy ones who are safest because they get the attention; it’s the quite ones who are more at risk because they get neglected.
“They’ll be kept in some small place, often a little workshop, and they’re tucked away.
“They’re the ones who get bullied and are suicide risks.
Mental illness in women’s prisons was also particularly worrying and “shameful”, he said.
An inspection report at Styal Prison in Cheshire last year deeply disturbed him.
He said: “The right word for what was going on at Styal is ‘self-mutilation’. “They were tearing great chunks out of themselves.
“If you had a very a disturbed man and they were tearing great chunks out of other people, there would be huge attention.
“But because they were doing it to themselves, they were simply not getting the level of support required.
“The staff often were simply heroic, but it was just ordinary prison officers dealing with these completely horrendous levels of self-harm.
“It was shameful. These were terribly ill women.
“No one dealing with them thought they were anything other than terribly ill.
“And they were stuck in this unit where ordinary prison officers were just busting a gut to try and stop them.
“When we looked at the use of force incidents, they were predominantly about prison officers cutting them down when they were trying to hang themselves.
“I had no idea it was like that, no idea.”
He added: “I don’t think the public, as a whole, understand just how big a problem this is.
“Yes, treating costs money but it costs a lot of money to keep someone in prison.
“On the whole, the Scandanavian countries are better at dealing with this. They start with the person, not the crimes, so they would look at what interventions does this person need rather than what we do about this crime
The Ministry of Justice said it would assess the results of the training programme at New Hall before deciding “whether there is potential for this to be rolled out further”.