The biggest prison in the country has been slammed by inspectors in another blow to its private operator G4S.
HMP Oakwood in Wolverhampton, which can hold 1,600 prisoners, had inexperienced staff and high levels of violence and self-harm, HM Inspectorate of Prisons (HMIP) said following a surprise visit.
In addition, the jail - dubbed "Jokewood" - urgently needed to address its approach to its near-300 sex offenders, many of whom were due for release without their offending having been addressed.
G4S, which was recently referred to the Serious Fraud Office for overcharging the Government for tagging criminals and was heavily-criticised last year for its botched handling of the Olympics security contract, said it had already taken steps to make improvements.
Frances Crook, chief executive of the Howard League for Penal Reform, said: " It is well-known in prison circles that this institution is referred to as 'Jokewood' by prisoners and staff across the system, but this isn't a joke - it is deeply serious.
"This private prison has been open for a year-and-a-half and it is getting worse, not better. On a payment-by-results model it would be closed because G4S are being paid for it and it is not delivering results."
Oakwood is a new training prison that opened in April 2012 for category C prisoners.
The inspection found too many prisoners felt unsafe and there was clear evidence of drug and alcohol use.
Prisoners were unable to access basic facilities, such as cleaning materials and kit, the report said, while staff-prisoner relationships were not respectful.
Healthcare provision was "very poor", inspectors said, which resulted in the Care Quality Commission hitting the healthcare provider with a regulatory enforcement notice, it added.
Chief Inspector of Prisons Nick Hardwick said there were " real risks if matters were allowed to drift" at the prison.
"Prisoner frustration needed to be addressed," he said. "Systems that delivered basic services had to be made to work. Work to build the competence and confidence of staff was required. Healthcare had to be delivered effectively.
"The quality of management information had to improve and the prison needed to engage and communicate more effectively with prisoners.
"Finally, the prison needed to create structures that will ensure progress is monitored, that changes are co-ordinated and that improvement is sustained and embedded."
A Government-wide review of all contracts held by G4S, two of the country's biggest private providers of public services, is currently being conducted.
The audit, triggered by revelations the firm had overcharged the Government for criminal-tagging contracts, prompted calls for the Ministry of Justice to abandon plans to privatise large chunks of the probation and prison service.
But it emerged the Justice Secretary does intend to allow G4S to bid for the probation service contracts.
A package of £450 million of contracts has been offered up to private and voluntary sector organisations, covering the supervision of 225,000 low and medium-risk offenders each year on a payment-by-results basis.
Jerry Petherick, managing director for G4S Custodial and Detention Services, said: "The mobilisation of any prison is a complex and challenging operation but the size and scale of Oakwood - the largest prison in the country - made this even more acute.
"As well as the logistical hurdles in new establishments, prisoners test the regime as well as the members of staff, who may be new to prison life.
"We have already taken steps to make improvements, appointing a dedicated taskforce to address problem areas, such as the prevalence of drugs, while providing additional funding where necessary. This is starting to yield results."
Juliet Lyon, director of the Prison Reform Trust, said: " Last autumn, the Justice Secretary hailed the G4S-run prison, boasting a cost per prison place per year around one third of the national average, as an example of what the private sector could achieve in prisons. And indeed it is.
"Slashing prison budgets while warehousing ever greater numbers overseen by largely inexperienced staff has come at a dangerous cost. This prison is not a model for the future but a warning."