Too large a slice of the extra billions pumped into the NHS ended up in the pockets of hospital consultants, MPs say in a highly critical report today.

Consultants' pay rose by more than a quarter in three years while their working hours fell and there was no "measurable improvement" in productivity, the Commons Public Accounts Committee (PAC) concluded.

Botched negotiations over a new contract, introduced in 2003, led to the higher-than-intended pay rise which was over 10 per cent more than the Department of Health expected. NHS trusts were allocated an extra £150m to make good the shortfall but they claim it was not enough and contributed to the financial crisis in 2005-06 which led to ward closures and staff cuts. The PAC's report into the debacle shows that consultants' pay increased on average by 27 per cent over the first three years of the new contract, from £86,746 in 2003-04 to £109,974 in 2005-06, but productivity fell in the first year by 0.5 per cent.

The report follows figures published earlier this month showing that average pay for GPs rose by 35 per cent between 2003-04 and 2005-06 to £110,004. Despite this, average working hours fell and most GPs dispensed with their out-of -hours responsibilities.

The consultants' contract, implemented in 2004 following two-and-a-half years of wrangling between the Government, NHS employers and the British Medical Association, was intended to reward those who gave most time to the NHS, halt the rise in private practice, increase productivity and create a more flexible workforce by giving managers greater control.

But these benefits have mostly not been realised, the Public Accounts Committee says. The proportion of time that consultants spend on direct care of patients has fallen, hours spent on private practice are unchanged, and the contract has not been used to extend services, for example by providing weekend or evening clinics.

The number of consultants rose by 13 per cent while total consultant activity rose by just 9 per cent and the number of patients treated per consultant fell year on year up to 2005-06. The average hours of work fell from 51.6 to 50.2.

Edward Leigh, the Conservative chairman of the cross-party committee, said: "Anyone who is puzzled how large quantities of money can be poured into the NHS to so little effect should examine the example of the new contract for consultants.

"The plain fact is that the Department of Health greatly increased consultants' salaries – on average by over a quarter – without securing any extra productivity from them. Worse than that, their productivity has actually decreased, with consultants spending less time working for the NHS and each one carrying out less activity."

The British Medical Association reacted furiously to the report, claiming it had made "fundamental errors" and used "crude measures" of productivity.

Jonathan Fielden, chair of the BMA's consultants committee, said: "The chairman of the PAC shows a complete lack of understanding of how consultants work. He ignores the vast efforts consultants have made to reduce waiting times and improve patient care and fails to appreciate the enormous pressure hospital trusts have been under to meet government targets.

"The relentless criticism of consultants and their pay is unreasonable and uncalled for when the vast majority are going the extra mile to ensure patients get the best possible care."