I cannot overemphasise the seriousness of our financial position

Ruth Carnall, NHS south east region

While the target to eliminate 15-month waiting for operations may still be met, the economy measures could well mean that other initiatives to cut queues are held back.

In the past it has not been unusual for NHS hospitals to carry over debts running into millions from financial year to financial year.

However, the government now insists that the NHS balances its books every year.

Pay rises

The South East region covers Kent, Sussex, Hampshire, Surrey, the Isle of Wight, Berkshire, Oxfordshire, Buckinghamshire and Northamptonshire.

Ruth Carnall said the situation was "totally unacceptable"

Other regions with debt problems are thought to be the London region and the south west of England.

The problem has been accentuated by heavy use of agency staff owing to a shortage of nurses in the region.

This can cost the trust hundreds of pounds for a single shift worked.

The government is trying to encourage the recruitment of more NHS nurses, with a target of 20,000 more between 2000 and 2004.

Trusts and health authorities have also had to absorb the cost of consecutive above-inflation pay rises for doctors and nurses.

This means that the service is struggling to make ends meet despite a record 9% extra investment.

Ms Carnall later issued a statement in which she promised that no patient services would be affected.

She said: "Any large organisation needs to balance its books as it approaches the end of the financial year - and the health service is no different."

'We need perspective'

Health Secretary Alan Milburn said he had asked Nigel Crisp, the chief executive of the NHS, to ensure that patient services were not compromised.

He said the south east region would be able to secure loans from other parts of the health service.

"We ought to get a bit of perspective on this. It is worth remembering that the NHS in the south east of England has an annual budget of �6,000m. This is one percent of the budget."

Mr Milburn said the overspend was probably the result of the health service doing its job.

He said: "The problem in the South East this year has been that there has been a big increase in the prescribing budget from family doctors. That is a good thing, it means that more drugs are getting to more patients, and it is probably keeping more patients out of expensive hospitals."

'Wrong culture'

Conservative shadow health secretary Liam Fox said services for patients were being slashed on the basis of centralised government targets rather than in any reasonable way.

"It seems to epitomise the culture which is now used to run the health service," Dr Fox told BBC Radio 4's Today programme.

An "accountancy first" attitude was being adopted, said the Tory MP, accusing ministers of "shambolic" management.

Asked whether the Tories would invest more in the NHS, Dr Fox said the money the government was putting in was failing to get through to patients.

Liberal Democrat health spokesman Dr Evan Harris said: "Cash shortfalls and cuts to patient services are not new. This happens every year under Conservative and Labour governments, but the explicit order to cut any service other than those which might impact on Labour's political targets is an unacceptable distortion of clinical priorities."