Half the new investment in the NHS hospital budget in the past year has been spent on higher pay for staff, a new analysis of NHS finances has shown.

Another 27% went on increases in capital costs, the cost of clinical negligence, and the cost of drugs, and meeting the recommendations of the National Institute for Health and Clinical Excellence.

As a result the NHS is struggling to meet targets and government health priorities, the analysis by a leading health policy think tank says.

The King's Fund, which has published two briefing papers on NHS finances, has also called for the government to become more sophisticated in its planning for future spending before committing more money to the health service.

In one of the briefing papers, Where's the Money Going?, the charity has analysed new data from the Department of Health and calculated that only 13% of the extra £3.6bn ($6.1bn; €5.1bn) invested in the NHS hospital and community health services budget in 2005-6 was available for new developments and meeting targets and …