The NHS was accused yesterday of "recklessly" expanding its staff so it could hit government targets and cut waiting lists but without calculating whether it could afford to employ them.

The result has been a "disastrous failure" in workforce planning, with many trusts discovering they have hired more staff than they can afford to pay, a committee of MPs said.

The report, from the Commons health select committee, casts light on one of the great mysteries of the NHS's recent history - how, after five years of record investment, one in three trusts is facing deficits amounting to a gross total of more than £1bn.

It shows that, since 1999 when NHS spending began to grow rapidly, hospitals and primary care trusts have over-reached themselves, employing too many extra staff and plunging themselves into debt.

The committee says NHS trusts chose to spend the billions of pounds being poured into the service on hiring extra hands rather than finding better ways of using their existing staff.

Between 1999 and 2005, an extra 260,000 employees were hired, an increase of almost a quarter. That included 17 per cent more GPs, 22 per cent more nurses, 37 per cent more consultants and 62 per cent more senior managers.

"These figures far exceeded those proposed in the NHS Plan [published in July 2000]. Hoped for increases in productivity were not happening. It was easier to employ more people than to think about how to perform a task more efficiently," the report says.

As boom has turned to bust, many posts have either been removed or frozen and some staff made redundant, the report says. Training budgets have been slashed and newly qualified staff have found it difficult to get jobs.

Among the casualties are 30,000 junior doctors who have found themselves competing with colleagues from other EU countries for 22,000 jobs, due to start on 1 August, whose situation has been aggravated by a shambolic and discredited selection system.

The committee also criticised large pay increases, introduced under new contracts that have seen GPs and consultants pay rise to an average of more than £100,000. It called on the Government to use the contracts to ensure the NHS got value for money.

Kevin Barron, chairman of the committee, said: "Improving workforce planning is crucial if the health service is to respond effectively to future change and provide value for money for taxpayers. We hope the Government will act swiftly on the recommendations."

The British Medical Association rejected the finding and said the UK was "still critically short of doctors." Sam Everington, deputy chair, said: "Ambitious targets to cut waiting times and improve preventative patient care have only been achieved by increasing the number of health professionals and by doctors delivering on new contracts."

Tory shadow health minister Stephen O'Brien said: "I am not surprised by the strength of criticism levelled at Patricia Hewitt by this report. She has done nothing to stop the demoralising central control of the NHS which is resulting in job losses.Patients are left bewildered about where all the money has gone and hard working staff are losing confidence by the day."