Health secretary Jeremy Hunt has pinpointed the price of litigation as one of the ‘shocking costs’ of poor care harming the NHS.

In a speech given yesterday in Birmingham Children’s Hospital, Hunt said standards in safety and quality of care must improve to reduce avoidable costs.

A report by financial analyst Frontier Economics found poor care is costing the NHS up to £2.5bn every year – with more than half that total taken up by spending on litigation costs.

‘These are large sums of money which the NHS is potentially wasting,’ said Hunt. ‘I want every director of every hospital trust to understand the impact this harm is having not just on their patients, but also on their finances.’

Figures from the NHS Litigation Authority show compensation payouts for clinical negligence have risen from £592m in 2005/06 to £1.3bn in 2012/13.

Hunt (pictured) said examples in the US show that hospitals could double their output on the same resources by targeting key factors such as litigation costs.

He added: ‘Too many people still think that providing the best care is something you do only when you can afford it – and fail to appreciate that improving care is one of the best ways to control costs in financially challenged circumstances.’

But the scale of the government’s task in improving standards was brought home by a report published yesterday by the Care Quality Commission.

The report found 80% of NHS bodies inspected were rated ‘inadequate’ or ‘require improvement’ when it comes to patient safety.

Inspections identified a wide variation in care between trusts, between hospital sites and even in different departments of the same hospital.

Peter Walsh, chief executive of the charity Action Against Medical Accidents, said it was a ‘startling reminder’ of how much the NHS has to improve in England on patient safety.