Spending on care bought from the private and voluntary sectors and local authorities has been rising by 15 per cent a year on average since 1995. That is faster than the rate of NHS growth as a whole. It reached almost 20 per cent a year between 2002 and 2006.

The proportion of healthcare bought from the private and voluntary sectors and from local authorities has more than doubled since Labour took power in 1997. It has risen from under 3 per cent of all NHS expenditure to just under 7 per cent by 2006. In cash terms, expenditure has risen from £1bn to just under £5bn.

Expenditure figures include: money spent on operations bought from private hospitals and independent treatment centres; spending on acute psychiatry in nursing homes for people with continuing care needs; and spending on community services for older people, those with mental health conditions and people with learning disabilities.

Labour has widened choice over where patients go for non-emergency operations. Also the use of private psychiatric providers (including medium-secure facilities for detained patients) has grown.

The service is now paying for heavily dependent patients who need continuing care. It had tried to shift that cost to the means-tested social care budget.

Where the growth has arisen, the ONS cannot yet say. But primary care trusts’ accounts for 2006-07 suggest that spending in independent sector treatment centres accounted for only 4 to 5 per cent of the growth.

Some 40 per cent of the increase appears to have been spent in private hospitals and psychiatric facilities. Spending on other community services, including the voluntary sector and local authorities, made up most of the rest of the increase.

The other big drivers of increased spending were extra staff, more prescribing by general practitioners, other goods and services, and capital expenditure. Payroll was the biggest destination of spending: the NHS hired nearly 300,000 more staff in the decade to 2006. Purchase of other goods and services was the next highest factor in the increase.

GP prescribing rose steeply as drugs such as statins to prevent heart attacks were prescribed much more widely.

While spending on care outside the NHS was a small proportion of total spending, it was the element that had grown most quickly, the statistics office said.

From:
http://www.ft.com/cms/s/0/3d2bb844-de92-11dc-9de3-0000779fd2ac.html