THE first signs of a two-tier hospital service in the region has been widely criticised.

Union officials, consultants and MPs have condemned a scheme which divides NHS hospitals into financial winners and losers, according to how they perform.

At stake is an extra £1m per hospital to spend on equipment.

While some hospitals awarded three stars in the recent Department of Health grading process have been given extra money, two star colleagues have been passed over.

Brook Berry, a plastic surgeon at the University Hospital of North Durham, said: "It is really going back to the Tory idea of pitting hospital against hospital, instead of encouraging co-operation."

The "winners" at South Durham, Northallerton, York, Sunderland and Newcastle, have all been given an extra £1m in the last few months.

But the "losers" which achieved a two star status - including South Tees, North Durham, Northumbria and South Tyneside - have been left empty handed in this latest round of allocations.

In the case of South Durham, which includes hospitals in Darlington and Bishop Auckland, the cash means officials can go out and buy much-needed x-ray and anaesthetic equipment, worth £467,000.

South Durham officials also plan to use their windfall to buy equipment for two additional high dependency beds.

Ironically, the North Durham Health Care NHS Trust, which is due to merge with South Durham today, only has two stars and is excluded from the scheme.

The idea of rewarding better performing NHS hospitals is part of Health Secretary Alan Milburn's carrot-and-stick approach to health care.

Eventually, if he succeeds in his battle with Chancellor Gordon Brown, three star centres will become "foundation hospitals" and be given greater financial freedom to borrow money and pay staff more than the going rate.

Liz Twist, Northern region spokeswoman for the Unison trade union, said: "We want to see as much money coming into the health service as possible, but we have concerns that benefits for high achievers may not be directing money where it needs to be spent."

The entire system of differentiating between three star and two star hospitals was "demotivating" for staff and would lead to a two-tier system, she said.

She said: "Clearly, the trusts that are providing a good service will draw resources away from the other trusts that need all the staff and commitment that they can get."

North Durham MP Kevan Jones said: "I don't think foundation hospitals has been well thought out - it will set hospital against hospital and lead to the kind of wasteful competitiveness which we had under the Tories."

Mr Berry said the differential reward scheme was "like something out of Alice In Wonderland".

"Usually, you are struggling because you don't have the resources you need to do the job," he said.