An NHS trust may be prosecuted for negligence after a lethal hospital bug killed at least 33 patients and infected 334 over two years.

A damning report into two outbreaks ofClostridium difficile at Stoke Mandeville Hospital, Buckinghamshire, severely criticised managers for repeatedly ignoring warnings from infection-control specialists.

They failed to follow advice from doctors, nurses and the Health Protection Agency (HPA) on stopping infection because they "mistakenly prioritised" other objectives such as hitting government targets and curbing spending, the report said. The Healthcare Commission, which carried out the inquiry, yesterday ordered every NHS hospital in England to review infection control procedures urgently in light of the findings.

National figures, published yesterday by the HPA, show cases of C. difficile infection rose 17.2 per cent to 51,690 in 2005. Six out of 10 NHS trusts saw their infection rate rise last year.

The Department of Health said the chief medical officer and chief nursing officer would review the inquiry report and consider how the recommendations should be implemented across the country "because of its wider application to the health service".

The inquiry has already claimed the heads of three senior managers at Buckinghamshire Hospitals NHS Trust, which runs Stoke Mandeville and two other hospitals. Ruth Harrison, the chief executive, and Andrew Croisdale-Appleby, the chairman, resigned last week. Andrew Kirk, the medical director who was also responsible for infection control at the hospital, will leave in a few months, the trust said yesterday.

Owing to the number of deaths and the failure of management, the Healthcare Commission has for the first time sent its report to the Health and Safety Executive, which has the power to prosecute organisations under the Health and Safety at Work Act.

Anna Walker, the chief executive of the Healthcare Commission, said: " There is a question whether there are prosecuting powers which should be looked at in relation to this case."

The report into Stoke Mandeville, which suffered the worst outbreak of C. difficile in the country, said it was a "tragedy" which could have been avoided. Lessons from the first outbreak, which lasted from October 2003 to June 2004, affecting 174 patients and causing 16 deaths, were not learnt before a second outbreak from October 2004 to June 2005 claimed another 17 lives.

The key factor was a failure to isolate infected patients but inadequate cleaning, lack of hand-washing facilities and poor state of wards contributed. Even after the second outbreak, when inspectors returned in December last year, they found faeces on bed rails, pubic hairs in baths, mould and cobwebs around showers and soiled commodes.

Ms Walker said: "There were serious management failures ... They did not apply the lessons from the first outbreak until pressure came from outside led by The Independent."

She denied waiting time targets were to blame, saying all managers had to deal with conflicting priorities.

But the report records a meeting at the hospital on 24 March 2005 at which the director of operations told a consultant in infection control who raised concerns about C. difficile that targets must be met "whatever the cost". In the foreword to the report, Sir Ian Kennedy, the commission's chairman, says: "Senior managers concentrated too much on one responsibility - meeting targets for waiting times."

David Lidington, Tory MP for Aylesbury, said: "What runs all through this report is that managers were putting central targets ahead of anything."

Andy Burnham, the health minister, said powers in the new Health Act would be used to deal with NHS trusts that failed to follow good practice in controlling infections.

Buckinghamshire Hospitals NHS Trust has been given 60 days by the Healthcare Commission to "improve patient safety". Alan Bedford, the acting chief executive, said infection rates from January to June were down by 80 per cent on the same period last year.

* Cases of MRSA fell slightly in 2005 to 7,087 but it was too early to say they were on a downward trend, the Health Protection Agency said. They were falling too slowly to reach the government target of a 50 per cent reduction by 2008.

'Independent' report prompted inquiry

A two-line e-mail arrived at The Independent in June 2005. It said there had been an outbreak of a new strain of Clostridium Difficile at Stoke Mandeville hospital with a death rate that was higher than normal.

Everyone knew about MRSA but few had heard of C Difficile. Yet it is the commonest cause of diarrhoea in hospitals and causes more than 2,000 deaths a year, twice as many as MRSA . It chiefly affects the elderly and cases had been rising for a decade, from fewer than 10,000 in the mid 1990s to more than 50,000 last year.

Eight days after The Independent revealed the outbreak at Stoke Mandeville on its front page on 6 June 2005, above, Patricia Hewitt, the Health Secretary ordered an inquiry by the Healthcare Commission. Yesterday's report says that managers at the hospital, who had ignored warnings about the infection, only responded under outside pressure. "It took the involvement of the Department of Health and national publicity to change their perspective," it said.

The report leaves unanswered the question of whether other trusts may be taking similar risks. Professor Peter Borriello, the director of the Centre for Infections at the Health Protection Agency, said he could not rule out the possibility that the situation at Stoke Mandeville was being repeated elsewhere.