Independent nursing agencies have called in the competition watchdog to investigate the NHS Professionals temporary staffing service, claiming it will drive them out of business.

And a senior industry figure has estimated that the scheme could add£400m a year to the cost of agency and bank nursing in England. The Federation of Independent Nursing Agencies, which represents around 25 per cent of UK nursing agencies, has lodged a complaint about NHS Professionals with the Office of Fair Trading.

It is worried by the associated regional framework agreements that will govern contracting between the NHS and agencies where NHS Professionals itself cannot provide temporary staff.

FINA president Robert Murgatroyd said the effect of the London Agency project, on which the regional frameworks have been modelled, 'has been to diminish the number of agencies able to supply trusts from 200 to 29'.

He said: 'It seems to me that the effect is anti-competitive. You'll have a single monopoly supplier.'

The federation's communications director, Charles Walker, said the proposed tendering process was 'legally unsound', with agencies barred from re-tendering for three years. 'This will result in the NHS damaging hundreds of small, high-quality suppliers.'

But Bill McClimont, corporate affairs director for staffing provider Nestor Healthcare Group, welcomed the NHS Professionals scheme as 'a very positive move'.

'There will be a contracting process with a limited number of providers which will incorporate many excellent quality measures, ' he said. But the move would raise costs as agencies would match NHS staff terms and conditions, he claimed. The Recruitment and Employment Confederation was in negotiations with the NHS Purchasing and Supply Agency, he said. 'Contract terms are not final yet, but I am expecting basic pay levels to be fixed in some way to the Whitley scale. I personally estimate it will increase the total cost of bank and agency staff by about£400m a year in England alone. Inevitably if agencies are paying these rates, the NHS will pick up these cost.'

A Department of Health spokesperson confirmed that staff pay and conditions would form part of the criteria for the regional agreements. 'NHS Professionals has to balance cost and quality with the emphasis on quality.

There may be a knock-on effect on cost to agencies, and therefore us.'