Ministers prepare to shut hospitals to save NHS cash

Hewitt puts pressure on health service managers to curb £800m overspend

Hospitals in prosperous parts of Britain may have to close to plug ballooning NHS deficits, senior health officials admit.

Patricia Hewitt is preparing the ground for a massive political battle to claw the health service back into the black within a year. The Secretary of State for Health insisted she is determined to curb the overspending that has driven the NHS about £800m into the red despite large increases in spending on health.

In an interview with this newspaper, Ms Hewitt said she had ordered an investigation by independent spending watchdogs into why some parts of the health service had run up deficits.

Effectively staking her political future on getting the NHS into "financial balance" within 12 months, she said: "We know we can turn this round."

Deficits hidden for years had been revealed by Labour's reforms, she said, adding that the investigation by the Audit Commission would uncover more.

Hospitals that do not balance their books will also be named as "weak" in a new rating system as ministers seek to turn the spotlight on inefficient managers.

Citing the example of widely differing lengths of hospital stays following hip replacements, Ms Hewitt said better patient care and increased efficiency went hand in hand.

Privately, health officials say ministers are prepared to see wards and even hospitals close rather than continue forcing efficient health services to bail out badly run institutions.

One official said: "Typically it's organisations serving the better-off areas, particularly in the south-east of England, that have been fiddling the system for years. That's unfair because the better-managed hospitals pick up the bill. Politically it's going to be very tough but we are determined NHS finances are transparent and fair."

But Ms Hewitt laid part of the blame for the deficit at the door of her predecessor, John Reid, who signed over-generous performance-related pay contracts with hospital doctors and GPs. Higher pay has swallowed about half of this year's cash increase, according to independent studies.

"It's been clear for a while that the [new contracts] have been costing us more than we anticipated," she said.