Research by APIL estimates that the cap on patient compensation deprives NHS trusts of £20 million a year, roughly equivalent to the cost of 750 nurses’ salaries.

The Government, however, argues that the Compensation Recovery Scheme rule ultimately saves money because it makes the system of clawing back funds from insurers simpler.

Under current law, motor, workplace and other insurers are obliged to notify the Department for Work and Pensions' Compensation Recovery Unit when a payout is being claimed by an injured party.

The unit then contacts hospitals, asking for details of the treatment given.

But Ms Greenfield said many victims of personal injury never reached the stage of litigation, and far more money could be recouped if trusts proactively went after insurers.

“It’s not unduly difficult, but very often trusts are not claiming the money at all,” she said.

A spokesman for the Department of Health said: “We expect hospital trusts to claim costs for accidents involving personal injury compensation so they can reinvest this money in vital frontline services.

“The introduction of a cap on the costs ensures more efficient and effective collection of funds by trusts, and avoids costly litigation battles where costs might be higher than the actual NHS charges being recovered