Fresh evidence of the funding crisis within the NHS emerged yesterday when a hospital announced that it was shedding 1,000 jobs to head off a £30m budget deficit next year.

The University Hospital of North Staffordshire, Stoke-on-Trent, said at least three-quarters of the redundancies could be compulsory, with 370 posts to go in nursing and midwifery. The hospital, which employs 6,500, said the Government's payment by results system, part of the drive to make hospitals more market driven, had contributed to the deficit, along with higher salaries and internal inefficiencies.

Consultants are being urged to minimise the number of nights patients stay in hospital and newly trained nurses have had job interviews postponed.

The trust's former chairman, Professor Calum Paton, and four directors stood down in December after admitting auditors did not pick up on an £18m overspend. He said yesterday changes in funding policy, private finance initiatives and new pay schemes had created the financial hole.