The number of cell places in Scottish prisons has remained the same and overcrowding is at an all-time high despite almost £300m being spent on improving conditions in the past six years, according to a report by Audit Scotland.

And it warned that plans to build an additional three prisons in the next five years will fail to cope with the expected 20% increase in numbers in the coming decade, leaving the estate short of 1100 places.

The report also stressed that, though community sentences are a cheaper alternative to custodial sentences, it found there are often waiting lists for places.

Scotland already has one of the highest prison populations in western Europe and numbers reached a record high of 7700 last month.

Of Scotland's 14 prisons, 11 are overcrowded and more than one-fifth of prisoners are sharing - at least two to a cell - in accommodation designed for one person, according to the report.

Between 2000-01 and 2006-07 the average number of prisoners in Scotland increased by 20%, and the number is expected to rise by the same level again by 2016-17.

Robert Black, the Auditor General for Scotland, said: "Significant amounts of money have been spent improving the conditions inside Scotland's prisons, but more than one in five prisoners are still sharing cells designed for one person.

"With projections indicating the prison population could rise as much by 2016 as it has done since 2001, it will be important to improve access to programmes that help to reduce reoffending as well as ensuring an adequate number of prison places."

In the past eight years the use of community sentences has shot up by more than 50%. However, the report says their use is limited by place availability and delays and calls for more research on their effectiveness.

Bill Aitken, the Tory justice spokesman, commented: "Many will find it astonishing that there has been this financial outlay and not one additional prison place has been created, albeit that prisoners are now being kept in greater comfort.

"The bottom line is that we need an additional prison."

Margaret Smith, LibDem justice spokeswoman, called for an overhaul of sentencing policy in Scotland.

"This report is concrete proof that the current trend of packing offenders off to jail is not working," she said. "There needs to be an overhaul of sentencing policy. Short-term prison sentences should be replaced with tougher community sentences that make offenders work to repay their communities.

"We cannot expect judges to hand down community sentences to offenders if there's a waiting list of several weeks, when a short-term custodial sentence can be started immediately."

Kenny MacAskill, the Justice Secretary, said a number of the report's recommendations are already being addressed as a matter of urgency.

"We have already made some progress in terms of revitalising community penalties and making record investment in the prison estate. But we cannot progress as quickly on this agenda as I would like until we tackle the problems of prison overcrowding.

"I have always believed prison should be for serious and dangerous offenders, which is why we are building three new prisons and committing record investment to our prison estate.

"However, we can't just build our way out of the problem. For every prison being built it means one less hospital or school for our communities."