Less Than A Third Of NHS Billions Spent On Patient Care

Less than a third of the extra money poured into the NHS last year was spent on improvements to patient services, according to Health Department figures obtained by the Daily Mail. Almost half the £5.5 billion of taxpayers money that was added to the health service budget in 2005/6 went on higher salaries for existing medical and managerial staff and a further 16 per cent on increased charges for existing drugs.

Only £1.8 billion was spent on extra staff, new drugs and services and capital projects, such as new hospital units and machinery.

The figures give a stark illustration of why, despite health spending having doubled since 1997, record numbers of health trusts are in deficit and medical services are being reduced in many parts of the country in order to balance the books.

Spending on health is still spiralling upwards and is expected to hit £92 billion a year by 2008 – up from £34 billion when Labour came to power nine years ago.

But the Daily Mail has found much of the extra money has been wasted through poor financial control at the Department of Health, inefficient spending by local trusts, and huge payments to management consultants.

Despite record levels of investment, the NHS ended the last financial year more than £500 million in debt – which equals the amount under-estimated by Whitehall accountants of how much staff pay rises would cost.

It emerged last week that GPs now earn on average £106,000 – a 30 per cent rise thanks to their new contract – and there have been big rises for hospital consultants, nurses and other staff.

Unions have warned of the damage being caused by belt-tightening across the country as trusts struggle to balance their books by next Spring, resulting in the loss of thousands of jobs, ward closures and service cutbacks.

John Appleby, senior economist at the King’s Fund health think-tank, said: “The Department of Health has admitted it under-budgeted for GPs and other groups of NHS workers when negotiating new contracts.

“But I think the Department has underplayed it. There is no way the NHS can support this level of remuneration without getting a rise in measured levels of output.”

The latest figures are contained in a 300-page document sent by the Department of Health to the Commons health select committee, which is conducting an inquiry into NHS expenditure.

It shows that in 2005/06, the total NHS budget was £77.6 billion: £5.5 billion higher than the previous year. Of this extra money, Labour spent 3.1bn on NHS staff.

But only £500 million of that bought in new doctors and nurses. The rest -£2.6 billion – was spent solely on funding huge pay increases.

The cost of the new contracts for staff was massively underestimated.

For example, between September 2004 and September 2005 – the most up-to-date figures available – an extra 1,340 consultants joined the NHS; an increase of 4 per cent.

But over 2005/06 the amount spent on consultants’ wages rose by 12 per cent to £3.4bn – so that the average consultant was earning close on £110,000, compared to around £86,000 before the contract.

The size of the consultants’ bill took Whitehall accountants by surprise: they now admit they underfunded the contract by some £90 million.

Critics claim this error was the result of ministers’ refusal to believe how much unpaid work consultants were doing under the old contract.

Many now admit they are doing the same amount of work for massively increased wages. Some, indeed, are doing less: figures show the number of consultations with mental health patients have fallen.

It is a similar story with nurses, midwives and other hospital staff. More were recruited, but their new pay deal – Agenda for Change – added £950 million to the NHS salary roll in one year alone.

This time the Department of Health underestimated the cost of the contract by £220 million, due to mistakes in calculating overtime rates and the cost of replacing people working fewer hours.

This, together with the fact that many cash-strapped trusts froze many nursing posts last year, meant many millions had to be spent on expensive agency nurses to fill the gaps in patient care.

Agenda for Change also agreed new pay deals for NHS managers whose numbers have risen by a staggering 78 per cent since 1997.

Family doctors have famously done well out of Labour’s reforms: taking home extra money from incentive payments under the new GP contract.

Again, civil servants underestimated how eager GPs would be to earn the extra money, underfunding the payments by £171 million last year, leaving local trusts to cut services to pay GPs what they were owed.

But over the past year, the number of GP consultations has declined, with less highly-qualified practice nurses taking up the slack.

Ninety per cent of family doctors have taken advantage of the new GP contract to opt out of the provision of out of hours care, such as in the evening or weekends, leaving primary care trusts to find alternate providers to fill the gaps.

These opt-outs have cost the NHS dear: last year the government was forced to give Primary Care Trusts an extra £322 million to bring in replacement out of hours services.

Even this was not spent wisely: a damning National Audit Office report found that these PCTs had wasted at least £53 million through inefficient commissioning.

The new contracts for NHS staff also included generous pension arrangements, which is expected to eat up around £11.1 billion of the total budget by 2007/08 and contributing towards the escalating cost of staff pay.

In addition, trusts fighting large deficits have also been ordered by ministers to bring in expensive management consultants.

The ‘turnaround teams’ were originally sent in to the worst-performing trusts, but now they are working in 143 organisations – a third of the total.

Last year these consultants charged a total of £22 million; money denied to frontline patient services. Last month senior Department of Health officials admitted that the service as a whole was predicted to be in the red by around £94 million at the end of the financial year.

Further cuts to public health budgets and medical training have already been earmarked.

Shadow Health Secretary Andrew Lansley said: “In too many places, blatant NHS cuts are being thinly disguised as measures designed to improve patient care. Patients and members of the public will not accept the consequences of these sham consultations.   “If the NHS financial crisis – rather than a desire to improve patient care – is driving the closure of an A&E department, then Patricia Hewitt needs to be honest enough to admit that her mismanagement is causing it.”

A spokesman for the Department of Health said a King’s Fund report earlier this year showed the extra money was reaching priority areas of mental health, coronary heart disease and cancer.

She said “Staff are the backbone of the NHS and they were underpaid for years – it is right and proper that hard working NHS staff like nurses and porters are paid a fair, decent wage.

“Yes, the contracts cost us more than we or the trade unions and professional associations anticipated, but staff are getting paid more for doing more.

“The NHS budget has doubled since 1997 and will have almost tripled by 2008.

“This extra money has cut waiting times, built new hospitals and surgeries, paid for more doctors and nurses to work and train, and improved access to healthcare for millions of people.”