Blair aide warns of 'immense risk' of extra NHS funds being wasted

Record investment in the National Health Service is likely to be frittered away, the Prime Minister has been warned in a bleak report by a senior adviser.

Michael Barber, head of the No 10 Delivery Unit, predicted that there was an "immense risk" of the extra billions being used to no effect. His comments came in a leaked confidential analysis prepared for Tony Blair and Alan Milburn, the Health Secretary.

The report says the Department of Health has to do more to convert into action its broad blueprint for improving the NHS. The most urgent task is to draw up local plans to spend the three-year settlement given to primary care trusts, which purchase care on behalf of patients.

It warns that this is "being managed to a very tight timetable. But we [the delivery unit] are concerned that there has not been enough forethought and planning [by the Health Department] for this one-off opportunity ... The risk is immense." Among the "very significant challenges" are the "weakness" of the primary care trusts and the strategic health authorities created by the Government last year. The unit delivers severe criticisms of the department, which needs "to get the right people into the right jobs faster" and which is understaffed in critical areas.

It forecasts that the health service will achieve its target for this year of ensuring no one waits more than 12 months for an in-patient admission. However, Mr Barber's report raises big questions over whether the NHS can hit its aim of reducing all waiting lists to under six months by 2005. "Meeting the 2005 target will require a different approach – which is not yet tested – and substantial activity growth," it says.

The delivery unit was set up to review government departments' progress on ensuring extra cash for public services reached the front line.

A Health Department spokesman refused to comment on the leak. But he said: "The Secretary of State and the Prime Minister believe the NHS needs more, not less reform. Extra investment is going in and we need to devolve power and responsibility to NHS services, particularly primary care trusts and foundation hospitals, so that local health services can be better attuned to the communities they serve." Mr Barber's report also takes a swipe at the speed with which the department has pursued the "choice and diversity" agenda, drawing on private-sector expertise to tackle waiting lists.

The report will alarm Labour leaders, who believe the next election will be fought around the Government's ability to meet its promises to improve standards in health, education and transport.

Gordon Brown, the Chancellor, announced large increases in health spending in the last Budget, paid for by higher national insurance rates. Spending on the NHS is planned to rise by 7.3 per cent annually in real terms, from £74.9bn in 2003-04 to £90.5bn two years later. He accepted the conclusions of the Wanless review into future funding of the NHS, which argued the service needed inflation-busting cash increases, combined with radical reform, to turn it round.