Wards are closing, operations are being delayed for the maximum permitted time and appointments are being cancelled by panels who override GP referrals, all to save money.

On Thursday Patricia Hewitt, the Health Secretary, disclosed that the NHS was heading for a deficit of £620 million, considerably more than last year. She laid down the law about how “inefficiency and poor financial management” would not be tolerated.

So what has happened to the extra billions provided to the NHS, increases that have averaged more than 7 per cent a year for the past five years? This year hospitals and community services, which eat up the biggest share of NHS spending, received £5,086 million more than in 2004.

An analysis by the King’s Fund think-tank shows that of this, only 2.4 per cent was available for new beds and operations. Ten times as much — 29 per cent — went on NHS pension rebasing. This was a consequence of transferring the cost of inflation-proofing from the Treasury to the Department of Health.

The second largest share, 27 per cent, went on pay increases for consultants, GPs and nurses, and on wages for the extra staff that have been hired.

Both the consultants’ and GPs’ contracts cost the department more than it expected. GPs achieved more “quality points” — a device to boost earnings of those who deliver better services, consisting largely of nagging patients to have tests. That added £400 million, while consultants cost £90 million more than expected.

“Staffing reforms” — otherwise known as Agenda for Change, the new pay scale for staff other than doctors or top executives — swallowed up another 12 per cent, while provision for negligence claims absorbed 5 per cent.

Changes that might actually be noticed by patients account for a much smaller proportion of the budget. Provision for extra spending on drugs in hospitals (5 per cent) and recommendations by the National Institute for Health and Clinical Excellence (8 per cent) are two.

The facts do not suggest that the money has yet had the benefits that might have been hoped for. In fact the huge increases have caused a sharp fall in NHS productivity: the increases in input have not been matched by increases in ouput.

This is partly because not everything can be measured. Drugs that stop people going into hospital may be a good investment, but are not reflected in productivity measures.

And services such as helping people to stop smoking take years to have any effect. So although productivity is not the only measure of success, it has declined sharply since 1997 to its lowest level since 1990.

There are, of course, successes: such as falling waiting times for operations. Figures released yesterday show that the waiting list in England has fallen below 800,000 for the first time, down 65,300 on last year.

There were still 24,800 on the list who had waited for more than six months, but the department believes that by the end of this year, that figure will be zero. “Investment and reform are working,” Ms Hewitt declared.

She did not specify which reform. The NHS is now in the midst of at least its third reform since Labour came to office.

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