NHS spending has doubled to £94bn since Labour came to power. So why are so many hospital trusts facing cash crises? Lindsay Jennings reports.

PRIOR to moving into Number 10, the considerably darker haired Tony Blair announced that he wanted to save the NHS. By the time he'd been in power seven months, he was feeling even bolder.

"I don't just want to save the NHS," he said. "I want to give it a new lease of life. It will take time, but with this Government the NHS will get better every year so that it delivers a modern, dependable service - based on need not ability to pay."

Since that speech, the Government has doubled its spending on the National Health Service to £94bn by this year.

The extra cash came partly from raising taxes and introducing a one per cent surcharge on National Insurance contributions in 2002. But people didn't seem to mind too much, if it meant waiting lists went down, nurses were paid more and there were more hospital beds.

After years of under-investment by the Tories, spending rose from £65bn to £105bn by 2008. Consultants and hospital GPs had salary increases worth up to 50 per cent over three years, making them among the best paid in Europe. Nurses had smaller but substantial rises. The staff in hospitals increased also - up by 21 per cent since 2000, including 80,000 more nurses and 30,000 doctors.

Hospital staff reported they were seeing the benefits. Waiting lists, said the Government, had come down by about 400,000 under Labour. In 1997 almost 300,000 were waiting 15 months for an operation. Now there is no-one waiting more than six months.

But then the tap started leaking again. It started a few weeks ago, trusts reporting huge deficits, hundreds of jobs would have to go. Later came the resignation of NHS chief executive Sir Nigel Crisp, following the realisation that NHS deficits could reach £800m.

Yesterday, the County Durham and Darlington Acute Hospitals NHS Trust was the latest to announce it was shedding jobs - up to 700 possibly over the next three years.

So, why has it all gone wrong for some health trusts and what has happened to the money?

According to Health Secretary Patricia Hewitt, much of the blame lies with individual managers, after all, she reasoned recently, many trusts have had no problems balancing the books.

But according to health experts in the region, the matter is not as simple as blaming the managers, the problems are deep-rooted and long term.

Glenn Turp, regional director of the Royal College of Nursing, says managers have been under huge pressure from the Government to achieve targets, such as waiting lists, waiting times, ensuring people are seen in accident and emergency departments within four hours, and increasing nurses' specialist roles. It has meant more training, extra staff and higher wage increases which have all had to be absorbed into budgets. A recent report by the health think-tank, the King's Fund, estimated that 40 per cent of £4.5bn funding earmarked for the NHS in 2006/7 would end up going on pay rises.

"It just feels as if the developments have come so fast and people have been concerned with getting the new services that the eye has come off the ball when it comes to budgets," says Mr Turp. "After years of working with a culture where there hasn't been quite such aggressive budget controlling, trusts are suddenly being told 'you will balance the books by the end of the year'. One of the good things about the trusts coming clean is that we get to see what the picture is.

"But it's a dripping tap that's now going full gush. There's strength in numbers and I wouldn't be surprised if we don't get a few more announcements."

As well as implementing the Government's policies, the increasing drugs bill has been cited as a budget drainer. In the last five years, the NHS drugs bill has risen by 46 per cent to £8bn as medical advances continue and a greater number and more expensive drugs come on the market.

There have also been reforms in the way trusts are paid. Hospitals are now paid per patient treated as opposed to being given lump sums based on past activity.

"The feeling is that all these things have not been adequately costed," says David Hunter, professor of health policy and management at Durham University. "In the past, managers have said at the end of the day we'll get bailed out, but I don't think the Government's going to do that. The managers are in a difficult position, many of them find it hard to do their jobs without political meddling."

Liz Twist, regional head of health for Unison, says the trusts need to come clean on exactly what issues they are facing and why they have overspent.

"I think there has been a lot of progress in the NHS and I know that people on the ground are seeing the difference thanks to extra staff and funding," she says.

"But the NHS needs to be really transparent, especially when we know the money's gone in."

The question remains: what will happen after 2008? The Government still has another £6bn to plough in, but then the NHS budget is expected to drop back to its usual annual two to three per cent increase, as opposed to seven per cent now. There is also one more target to meet - an 18 week waiting time target.

Will Mr Blair be able to save the NHS after all or could the funding crisis escalate, becoming an issue which makes Gordon Brown's route to Number 10 that bit quicker?

"The Prime Minister said when he came into office that the NHS would be saved, which no other Prime Minister has ever said, and because of that there's been a degree of meddling that's made the managers very exposed and very vulnerable," says Prof Hunter. "In the end, the Government has made a rod for its own back."