More than £100 million of taxpayers money set aside to improve care for the elderly and disabled has been spent by councils simply propping up the existing system, a report shows.

The Coalition has pledged to divert £2 billion from the NHS budget into the crisis-hit social care system over the next few years.

As a result NHS trusts handed over £648 million from their budgets to local councils in the last year alone as part of a drive to bring the health and social care systems more closely together.

Studies have suggested that a lack of support at home for frail elderly people who have been discharged from hospital could be costing the NHS more than £300 million a year because so many are ending up back on the wards within weeks.

A shortage of specialist care in the home is also blamed for high rates of “bed-blocking” in hospitals.

Andrew Lansley, the Health Secretary, said last year that the first tranche of money would be targeted toward efforts to integrate health and social care especially a range of specialist facilities for people leaving hospital.

But a study of by the health consultancy MHP Health Mandate found that nearly half of councils are using much of the money plugging gaps in existing services.

It also highlighted dramatic variations between different areas in how much money was spent on the new services.

And the report lays bare a dramatic postcode lottery in the availability of care in people’s homes. In some areas, one in five people are able to access home carewhile in others it is only one in 25.

At present almost all councils only provide social care for people classed as having “critical” or “substantial” needs meaning that up to a million people in need of care receive no state support.

But the study highlights how £115 million of the £648 million diverted last year was spent maintaining the existing eligibility criteria rather than widening access to others.

In two areas, Manchester and Sheffield, all of the extra money was spent on this, according to the report, which used figures from an internal government audit of where the money went.

By contrast in Nottinghamshire and Bristol only three per cent of the money went on this

Meanwhile across the country only four per cent of the money went on services for people with mental health problems, with wide variations between areas.

At present mental health takes up 10 per cent of the NHS budget, according to the study.

Only eight per cent went on special discharge schemes, which provide special temporary support to people who have just been in hospital to help them adapt and prevent them being readmitted. Yet in some areas this was seen as a higher priority such as in part of Kent where 40 per cent of the extra money went on this.

Michelle Mitchell, director of Age UK, said: “It does not sadly come as much surprise to hear that the NHS money supposed to be used to bridge the often wide gap between health care and social care provision, has instead to be used to prop up a crumbling system.

She added: “When the Chancellor announced the ‘£2 billion additional funding for social care’ in his spending review, what he failed to highlight was that local authorities who provide state funded social care were at the same time facing large cuts in their grants from Government.

“As a result spending on social care has been cut by 4.5% over the last year despite growing demand for services.”

Cllr David Rogers, Chairman of the Local Government Association’s community wellbeing board, said: “It’s hardly surprising that councils are barely maintaining the status quo given the funding crisis we are facing in providing care to our rapidly ageing population.

“It’s important to recognise that the growing crisis is not a problem of council inefficiency, but of growing demand and escalating costs in a system that is underfunded by £1 billion annually, and now compounded by severe funding cuts.

“In spite of our best efforts to squeeze every pound through cutting red-tape, making back office savings, linking services and exploring a whole range of other innovations, there simply isn’t enough money to do everything we used to.

“Councils are committed to doing the very best for people in later life and despite a 28 per cent funding cut from government, council spending on adult services this year is expected to fall by just 2.5 per cent, the lowest for any service area.

“Gifts of extra cash here and there just paper over the ever-expanding cracks and are short-sighted. We need root and branch reform of how the system is funded.

“The challenge of reforming adult social care is set to fall off a cliff edge and politicians need to act now or risk severely impacting on the services councils can provide for generations to come.”

Mike Birtwistle, managing director of MHP Health Mandate, said: “The variations we reveal cannot be explained by differences in need.

“The current system is chaotic and too often quality is being forgotten.

“Simply funding more of the same will not deliver better social care services.”

“If the Government is going to ask the taxpayer to contribute more to the rising costs of social care, then there must be greater transparency and accountability for how this money is being spent and the quality of care being delivered.”

He added that the Government’s forthcoming white paper on reforming social care should include measures to stop money being “sucked into maintaining the status quo”.