One in six hospitals and GP practices is facing severe financial problems, despite a doubling of the NHS budget since 1997, spending watchdogs warn today.

The worsening financial position of the NHS while its coffers are being swelled by billions of pounds is a "matter of major concern," the National Audit Office (NAO) and the Audit Commission say.

More than 100 NHS organisations were facing significant deficits in 2003-04 - a 50 per cent increase on the previous year - and the situation got worse in 2004-05. At least 12 strategic health authorities ended the year with a deficit, compared with seven in 2003-04.

Sir John Bourn, head of the NAO, said: "If we have another five years like the last, things will be getting difficult. We will have another five years of just keeping the show on the road." Services were already being cut because of poor management of finances and the situation was set to get even worse with government reforms. "A trust can be surprised at the end of the year to find it does not have the money and we do see examples of services being abridged," Sir John said.

NHS spending is growing by an average of 7.3 per cent in real terms under the five-year settlement from 2002-03 to 2007-08, the fastest increase in its history, yet it is still not enough.

The Government target of a maximum 18-hour wait by 2008, new contracts for doctors which have proved more expensive than expected and the payment by results system for NHS trusts will place "unprecedented pressure" on the NHS, the report says.

Patricia Hewitt, the Health Secretary, said : "I believe the reforms we are putting in place, such as new staff contracts, new financial flows and new IT, are the solution, not the problem."

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