An NAO report on sustainability and transformation in the NHS warns that a £1.8bn fund intended to stabilise the health service and allow it to transform services was instead spent on coping with existing pressures.
Despite improvments to the overall NHS financial position after the funding boost, the NHS is 'struggling to manage increased activity and demand within its budget and has not met NHS access targets', the report warns.
Short-term funding measures to bail out trusts have undermined the ability of the NHS to deliver reforms that might make it more sustainable, the report adds. The DH used £1.2bn of its capital budget to help hospitals cope with day to day pressures - limiting funds available for transformation.
The value of in-year loans from the DH to trusts facing financial problems - which these struggling organisations must repay with interest - rose to £2.7bn in 2016/17. Repayment costs are deepening funding problems for these trusts rather than solving them, the watchdog warns.
Head of the NAO Amyas Morse said: 'The NHS has received extra funding, but this has mostly been used to cope with current pressures and has not provided the stable platform intended from which to transform services.
'Repeated short-term funding-boosts could turn into the new normal, when the public purse may be better served by a long-term funding settlement that provides a stable platform for sustained improvements.'
Meg Hillier, chair of the House of Commons public accounts committee, said: 'The NAO says the NHS cannot carry on in its current financial position. This will come as no surprise to everyone affected by overcrowded hospitals and cancelled operations this winter.
'The public accounts committee has called for a long-term plan for the NHS - the recent winter crisis hammers home why this is so vital.'
BMA chair Dr Chaand Nagpaul said: 'This report provides clear evidence that investment designed to help the NHS transform and improve patient services is instead being used to firefight and meet existing pressures and deficits.
'With pressure on NHS services intensifying year on year, we agree with the report’s findings that the short-term funding is not meeting patients’ needs. We urgently need politicians of all parties need to come together to agree a long-term, sustainable funding plan for the NHS.'
A DH spokeswoman said: 'As this report recognises, the NHS has made significant progress towards balancing the books and returning to a financially stable position – to support this we recently gave it top priority in the budget with an extra £2.8bn, on top of a planned £10bn a year increase in its budget by 2020/21.'