Health Secretary Frank Dobson said the report by Peter Fallon QC on the Personality Disorder Unit (PDU) at the hospital in Maghull, Merseyside, presented a "shameful" picture.

However, Mr Dobson rejected a recommendation to close the hospital. He did urge the NHS to take action action against staff found to be culpable in the report, and said Ashworth had four months to draw up an action plan for radical change.

Frank Dobson: "There was drug abuse, pornography and poor quality patient care"

He said: "For the foreseeable future, the three special hospitals must continue to be the main providers of high security services. There is no practical alternative in the short term," he said.

"The problem at Ashworth is not one of bricks and mortar, it is one of management and that is one we are determined to tackle."

Social Affairs Editor Niall Dickson: "The hospital was a mess from top to bottom"

The Fallon report found that a eight-year-old girl was allowed to visit a PDU ward repeatedly.

She was allowed unsupervised contact with patients who had a record of sexual abuse against children.

'Paedophile purposes'

The girl was brought into the hospital by her father, who gave her unsupervised access to one patient who had a history of molesting young girls.

The report concluded that while there was no evidence of abuse taking place, the child was certainly at risk.

Peter Fallon QC: "The system was rotten"

Mr Fallon said: "Undoubtedly, if that child has not been interfered with - of which there is no physical evidence, although it was a long time ago - she was certainly being groomed for paedophile purposes."

The report found that staff at the hospital had done nothing to protect the child and "some of them even judged it to be in the interests of the patient".

However, Mr Fallon said the situation had not been the fault of staff. "The problem here was the system," he said. "The system itself was rotten - it needed changing. The nurses, on the whole, were doing an extremely good job."

Patient's claims

The inquiry team supported claims by former Ashworth patient Steven Daggett, who prompted the investigation.

Niall Dickson explains the background to the report

Mr Fallon said: "We found Mr Daggett's description of the environment on Lawrence Ward to be largely accurate.

"Pornography was widely available on the ward; patients were running their own businesses; hospitals were ignored and security was farcical."

The inquiry said the personality disorder unit was "a deeply flawed creation".

"A number of highly serious reports have demonstrated Ashworth Hospital's failure to care for and manage a large group of severely personality disordered patients".

Mr Dobson said the report uncovered a "shameful story of confusion, indecision, mismanagement and incompetence."

"Too many people at Ashworth failed to do properly the jobs they were paid to do," he said.

Mr Dobson said the government was prepared to consider radical changes to mental health laws to introduce "reviewable" sentences for prisoners previously considered untreatable because of severe personality disorders.

The health secretary accepted that security should be given a higher priority with searches of patients, visitors and staff.

An extra £1.5 million was being made available to fund extra security at three special hospitals, Broadmoor in Berkshire, Rampton in Nottinghamshire and Ashworth, he said.

An independent security review would also look at all aspects including the use of post and telephones.

Visits by children had been banned unless judged to be in their best interests and supervised off ward.

Professor Ray Rowden: "Ashworth should be closed"

Professor Ray Rowden, of York University and a former head of Britain's secure units, said "staff's sensibilities became blunted" and they ignored the worst elements of the situation.

He disagreed with Mr Dobson, and said it was a problem of bricks and mortar. He said Ashworth should close.

Such institutions were outdated, he said, and "steeped in the treacle of their own histories".

He added that he would not be surprised to see a similar scandal at the hospital in two or three years time if the care regime was not radically restructured.

"These hospitals should not be allowed to stay out of sight, out of mind," he said.

The 470-page report contains 58 recommendations about the treatment of prisoners with personality disorders.

A number of senior officials criticised in the report have stood down.

Dangerous criminals

There are three such hospitals in the UK - Broadmoor, Rampton and Ashworth.

They are home to some of the country's most dangerous criminals.

An inquiry into Ashworth was ordered by Stephen Dorrell, the Conservatives' former health secretary, in February 1997, following allegations of paedophilia, pornography, drug and alcohol abuse at the hospital.

The mental health charity, Mind, has repeatedly called for the closure of the hospitals.

A spokeswoman for the charity said: "We want a national network of smaller, more manageable high security units rather than these massive institutions that are trying to treat people with a huge range of mental health needs."

She added: "It took the escape of a convicted sex offender from Ashworth who became a whistleblower to show what the problems are."

Suspensions

The allegations in February 1997 prompted the suspension of Ashworth's chief executive Janice Miles.

Although cleared by an internal inquiry, she resigned in July of the same year.

Her replacement, Dr Hilary Hodge, then resigned in July 1998 after senior doctors at Ashworth expressed "grave concerns" about her management style.

Five staff members were also suspended after the inquiry was announced and at least nine others have resigned before Mr Fallon began his hearings.