The first independent analysis of the Department of Health's programme budgeting data across 300 primary care trusts shows that extra spending can give rise to better health outcomes. The Health Foundation, which published the report, believes this provides powerful evidence that NHS expenditure can provide good value for money if targeted in the right way.

Professor Peter Smith from York University led a team of researchers to model the link between spending and health outcomes in two of the largest programmes of healthcare: circulatory disease and cancer. The report, The Link Between Healthcare Spending and Health Outcomes: evidence from English programme budgeting data, shows that increased spending on healthcare leads to better outcomes for patients in these two areas.

'Using the programme budgeting data, we have shown that spending more on healthcare can lead to better patient outcomes once you take the relative need of populations into consideration,' says Professor Smith. 'This has profound implications for the Treasury in how it decides to allocate future budgets across all public services. The report shows that spending on healthcare may be a more cost-effective approach to saving lives than many commentators believe.'

Using data for the financial year 2004-05, the team estimated how much money would be needed to save a year of life in each disease category. For a PCT with average needs and expenditure, the report shows that the marginal cost of a quality-adjusted life year (QALY) saved is approximately£12,000 for circulatory disease and£19,000 for cancer. These figures compare favourably with the figure of£30,000 per QALY commonly attributed to the National Institute for Health and Clinical Excellence as a basis for deciding whether or not to recommend adoption of a new technology.

Peter Smith and colleagues plan to continue their research by evaluating the link between expenditure and health outcomes in a range of other disease areas, including diabetes, respiratory, gastrointestinal and neurological diseases.

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