Funding for a ground-breaking mental health scheme to ease strain on emergency services has been axed by the government.

An $8 million co-response service would see a mental health worker attend all crisis calls along with police and ambulance staff.

Officials believed it could slash the number of mentally ill people being locked up in police cells by as much as 75 per cent.

But Health Minister David Clark has dumped the programme, which was due to begin in September.

It comes a week after Stuff revealed the Government dropped extra funding for cochlear implant surgeries.

Proposal documents said those in distress were to be assessed in their homes or on the scene "to ensure they receive a timely and holistic response."

It would reduce the number of people being detained or transported to emergency and mean fewer emergency service calls to police and ambulance services.

"There is strong international evidence that a co-response service will be more cost effective than the current operating model, with a lower average cost per event attended," the proposal noted.

A police spokesperson says that is was to be funded from a Mental Health Contingency Fund established in the 2017 Budget. But the new Government "reallocated" the money "to other priorities".

"Consequently the three agencies involved did not receive funding to commence the pilot. Questions around the re-allocation of this funding should be addressed to the Minister of Health," she adds.

Mental Health Foundation chief executive Shaun Robinson says it was the first he had heard of the scheme being culled.

But, pulling the plug may not have been such a bad thing. While the foundation was cautiously supportive of the scheme, it did not necessarily think it was the solution to the crisis.

The ongoing mental health inquiry under the current Government may have more direction on how to fix the mental health solution, says Shaun.

"What we need in New Zealand is a paradigm change in how we think about mental health," says Shaun.

"I don't know if the initiatives would have done that, but then I don't know if the mental health inquiry will either."

At present, the mental health inquiry was all talk, and stakeholders were waiting to see if there would be action.

"I do hope that police do get a lot of support, though."

National's police spokesman Chris Bishop said it was a "disgraceful decision."

"Everyone I've talked to in police and the social sector was really excited about it because it was designed by experts to work.

"The police are dealing with more and more mental health cases and in their own words, they aren't equipped to deal with it."

Earlier this month police revealed a spike in suicide related callouts - up by more than 50 per cent in five years. There were around 14,500 received in 2013 and 21,700 last year.

In January, the Government announced an inquiry to improve mental health services. It is due to report back in October.

"It's only $8m and it's not controversial about whether it will work. Everyone supports it," says Chris."It feels like everything is out on hold until the inquiry comes back but the need is there now and the money was there."

But Clark disputes that and says National had not properly allocated the funding.

"The pilot for a multi-agency co-response service for people who call 111 in regards to mental health was one of 17 mental health ideas floated by the previous Government which it never properly developed," Clark says.

There was "never much substance" to the $224m funding set aside for mental health funding in Budget 2017 "which was trumpeted by the previous Government".

Furthermore, the mental health review which is underway will include advice to improve early response to those in urgent need, Clark added.

"I recognise there is merit in improving the response to 111 mental health call outs – both for the benefit of those in need and to ease police workload."

- Andrea Vance/ Stuff