When Gordon Brown, as Chancellor, promised the NHS a cash bonanza, economists shook their heads and gave warning that so much money so fast could only lead to inflation.

They were right. The King’s Fund estimates that 43 per cent of the extra cash has gone on pay and price inflation, and only 7 per cent on increased elective surgery to cut the waiting lists.

Reform, the market-orientated think-tank, estimates that while real-term funding has doubled, activity, quality and access to services have increased by only 20 to 30 per cent. So what happens now that the tap has been half turned off?

History suggests that the NHS will make productivity gains once it has less money to spend. In the Conservative era of modest spending growth the NHS made gains in productivity. In the Labour era, broadly speaking, it has not.

Measuring healthcare productivity, however, is tricky. Sir Derek Wanless’s report for the King’s Fund shows that, depending on the assumptions made, NHS productivity has either declined by 7 per cent since 1999 or risen by 8 per cent. There is no agreed formula to take account of changing quality and at best, Wanless himself concluded, productivity no more than inched upwards between 1999 and 2004.

Some of the biggest improvements were made when competition was introduced. Patient Choice cut waiting times for operations and competition from independent-sector treatment centres sharpened the performance of NHS hospitals.

Mr Brown’s Government has placed less emphasis on such tools, leading some to fear a retreat from reform. The Darzi Review, with its emphasis on centrally driven initiatives and increased inputs, reinforces the view that the clock has been rewound to about 2000, the year of the NHS Plan.

Any system that can absorb almost half the extra funding in staff pay is a classic example of producer capture. Losing the momentum of reform now will reinforce the feeling that the NHS does more for those who work in it than those it serves.