NHS hospital consultants are being poorly managed and their 2003 contract was a “missed opportunity” which delivered poor value for money, the Public Accounts Committee has said.

It criticised the NHS for failing to properly performance manage its 40,390 consultants and said the Department of Health had not been “ambitious enough” in setting targets.

The committee found the 2003 contract resulted in consultants’ pay increasing in 2003-4 by between 24 and 28 per cent while their productivity declined by 0.2 per cent between 2003 and 2010.

According to the report, the cost of the contract was equivalent to an extra £400m a year.

The report comes as NHS Employers and the British Medical Association are in preliminary talks to renegotiate the contract and it could strengthen NHS Employers’ case to make changes.

Following changes to doctors’ pensions a reduction in consultant pay is unlikely to be well received by the BMA. However, NHS Employers, which negotiates on behalf of the Department of Health, may try to crack down on consultants’ ability to avoid weekend work.

Any negotiations will also seek to address the potential problems of a bulge in the consultant workforce. It is projected that by 2020 their number will increase of 60 per cent at a cost of £2.2bn.

The committee’s report said the existing contract “was a missed opportunity to deliver a step-change in consultant performance and has provided poor value for money to the taxpayer.”

It highlighted the fact consultants can refuse to work during evenings and weekends and criticised the NHS for poor use of appraisals - 17 per cent of consultants had not had an appraisal in the past 12 months.

Clinical excellence awards, which can see consultants receive a pensionable lump-sum of up to £75,000, were the “norm rather than the exception”, it said, with 61 per cent of consultants holding one. CEAs cost £500m a year.

The committee concluded: “Improved performance management is essential if we are to avoid incidents of poor performance such as those witnessed at Mid Staffs.

“We consider the failure by the NHS to implement a proper culture of performance management as a crucial factor in the poor standards of care recently witnessed.”

Should any new contract be negotiated MPs demanded better targets, increased flexibility on seven day working and improved performance management.

Paul Flynn, chairman of the BMA consultants committee, told HSJ a number of flexibilities were already available to employers. He added: “If employers actually engaged in job planning they would get more of what they want.

“There is no point giving employers a new set of tools to use when they have failed to use those that already exist.”

Dr Flynn said the NHS got a “tremendous deal” from consultants, adding: “There is no obstacle in the contract of having a consultant there when the patient needs one.”

Gill Bellord. director of employment relations at NHS Employers, said: “The PAC report raises some important issues about care for patients which are of increasing concern. It is time to refresh the contract and the awards for clinical excellence to strengthen performance management and incentivise excellence.”