After emergency talks with the Chancellor of the Exchequer, the Health Secretary is believed to have won pounds 800m extra to account for inflation in the NHS, with up to pounds 500m to meet the prime minister's commitment to guarantee the health service an increase in real terms.
The settlement, brokered by the Chancellor after a series of meetings at Downing Street over the last 48 hours, is expected to allow the Cabinet to agree spending limits today to make room for modest tax cuts in the budget.
The National Association of Health Authorities and Trusts estimated English hospitals needed a minimum of pounds 200m - less than 1 per cent of total NHS spending - to see them through to March.
The NHS Trust Federation said that to avoid extending waiting lists and delaying non-urgent surgery such as hip replacements and varicose-vein treatments, some pounds 300m extra was needed.
Mr Dorrell will face Commons questions today over the extent of the crisis. Simon Hughes, the Liberal Democrat spokesman, said the NHS faced the biggest squeeze since the Seventies.
But as John Major prepared to chair today's Cabinet, he was accused of fiddling the figures to keep his election pledge to spend more in real terms on the NHS every year.
Draft figures handed by the Department of Health to the Commons Select Committee on Health were changed to show growth in spending on health and personal services of 0.1 per cent instead of a cut of 0.3 per cent.
A close study of the figures shows that the Government's pledge on NHS spending upheld by statistical sleight of hand. The department told the committee the forecast out-turn for 1995-96 would be pounds 34.5bn. When set against the pounds 35.4bn in the planned total for 1996-97, it meant in real terms, taking into account inflation in the NHS, there would be a fall of 0.3 per cent this year.
But when the figures were published, the forecast out-turn for 1995-96 had been reduced to pounds 34.4bn, enabling the Government to show a growth in real terms of 0.1 per cent.
The change was spotted by Hugh Bayley, a Labour member of the committee. "I would say that the real-terms increase is just not being met this year. It looks as though they are fiddling the figures. They have not added an extra penny," he said.
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