Anybody could have told the chancellor of the exchequer, and some people did, that throwing new billions at the National Health Service would be throwing them away.

So it has proved. The independent National Audit Commission published a report on the NHS last week which said that our newly extracted money is being wasted, and will probably go on being wasted.

The money is being used to buy short-term results at the expense of long-term planning. In 2001, for instance, health spending rose by 11%, yet health service output increased by only 3%. The commission’s auditors actually say that better management of resources, rather than more resources, is the key to cutting waiting times in hospitals.

The same is true of public services generally. The Office for National Statistics has recently reported that the money — our money — which the government is pouring into public services is not being spent productively. Between 1997 and 2002, spending on public services rose by 40%. Output increased by only 14%.

Much of this money is disappearing into the insatiable gullet of the NHS. The audit commission criticises a long list of quick-fix measures in the NHS and the huge number of targets. And NHS waiting lists have now gone back to more than 1m only a month after the government was crowing about a historic drop below this vast figure.

I particularly enjoyed, in a grim sort of way, the evidence reported by the British Medical Association last week that most hospital accident and emergency departments (85%) met government targets during the week they were being monitored, but only 55% did so in the week before and 65% in the week after.

What’s more, one-third of the doctors questioned in the BMA survey did not believe that the figures the government published for their departments were accurate — scepticism about new Labour claims has now reached the levels of a serious epidemic.

Faced with all these inconvenient hordes of expensive patients, the government has come up with a new proposal that is pure Monty Python. Last week it solemnly announced a fourth way for the NHS. Stop treating the fatties — and the smokers. That would soon bring down the waiting lists and operation costs because these are, of course, the sickest and costliest patients.

The overweight and heavy smokers come predominantly from the most deprived classes, so they would all die much earlier of heart attacks and strokes if denied treatment, saving social services and housing a great deal of money as well. And pensions, too. Brilliant. This must be what new Labour means by joined-up government.

However, there was resistance all round and the selection of the fattest scheme, like so many other new Labour wheezes, has gone back to the drawing board.

One of the main problems with the NHS is its culture of waste. This wastefulness means, among other things, that nurses are underpaid, overworked, demoralised and leaving.

Early this year a distinguished cancer consultant, Maurice Slevin, published a paper for the Centre for Policy Studies attacking over-management in the NHS. He argued (using government figures) that while there are eight managers for every 10 nurses in the NHS, there are just under two for every 10 in a comparable private hospital. Yet private hospitals are indisputably better and more efficient, like for like.

Slevin says that if the proportions of managers and administrators in the NHS could be cut back hard to the proportion in the private sector, the money saved could hire many more nurses and radiographers, and pay them 30%-40% more, without costing the NHS extra.