Hospitals are facing increasing financial pressure from the changes to NHS funding, which will cost £50m in administrative costs, the Audit Commission warned.

The "payment by results" programme, a scheme which pays NHS trusts directly for patient care to reward efficient hospitals and promote greater patient choice, has posed "severe challenges".

"In the first year, payment by results proved to be a more complex, time-consuming and challenging process for the early implementers than they anticipated," the Audit Commission report said.

"It requires investment of time and resources. The organisations in our sample spent approximately £100,000 each, equivalent to £50m nationally."

The commission called on the Government to protect Accident and Emergency departments from the short-term dangers of the payment-by-results programme.

But despite the dangers of the new payments system, in the longer term it will benefit the NHS, according to the commission.

The report echoes concerns voiced by medical staff over the mounting financial deficits faced by the NHS. The Royal College of Nursing said that 3,000 NHS staff, including at least 1,000 nurses, could face job losses as NHS trusts face deficits set to reach £1bn across England in the current financial year.

The RCN said that some trusts are talking about redundancies, and that the losses are expected to be worst in the South-east, London and East Anglia.

But the Health Minister Lord Warner said: "Overall, our figures suggest the NHS is actually planning to increase the number of nurses this year by 2 per cent. Every year there are predictions of huge deficits, but they need to be treated with caution."