Published: 11/4/2002, Volume II2, No. 5800 Page 6

NHS Confederation chief executive Gill Morgan has called for the budget allocations to take account of the cost of underlying service reforms, as well as increases in NHS activity.

Ms Morgan said: 'It is important that in the allocations to the service over the next few years, quality improvement is seen as valuable and important, and There is provision for that as well as investment in levels of activity.' She wanted to see 'recognition in the budget process that both bits cost money'.

'There needs to be clear identification of what quality gains We are trying to achieve and what the cost of those gains will be.'

In a report to the modernisation board at the end of the financial year 2001-02, NHS finance director Richard Douglas had confirmed that staff pay accounted for£1.9bn of last year's£4bn extra funding, while£1bn extra was spent on drugs, against a backdrop of fewer waiting-list cases being treated.

But Dr Morgan said: 'The question is about where the money's gone - where's the activity gain?

But one answer is the money's gone into quality improvement.'