Chair of south-west London trust says hospitals will be unable to pay staff next year unless Jeremy Hunt doubles annual funding rise to £4bn

The NHS is gripped by “an accelerating financial disaster” that could mean hospitals are unable to pay their staff next year, one of the service’s bosses has said.

Christopher Smallwood, chairman of St George’s University Hospitals NHS foundation trust, which serves 1.3 million people in south-west London, claims that years of underfunding have left hospitals short of staff and unable to meet waiting time targets for cancer and A&E care.

As chair of a trust, I’m speaking out. The NHS is headed for financial ruin | Christopher Smallwood Read more

In a candid article for the Guardian, Smallwood accuses ministers of being in denial about the seriousness of the situation facing the health service, and itsroot causes. He describes the health secretary Jeremy Hunt’s insistence that the NHS deliver £22bn of efficiency savings by 2020 as “for the birds”.

Such a strong intervention by a senior figure in the NHS will increase the pressure on the chancellor, George Osborne, before his spending review on 25 November.

Smallwood predicts that the NHS could suffer a “widespread financial collapse” next year if the government does not inject at least an extra £4bn annually – double the amount expected.

Christoper Smallwood.

Smallwood says his hospital, where the Channel 4 series 24 Hours in A&E is filmed, is facing “an unprecedented financial shortfall”, as are many others. “The NHS is heading for a real smash and practically everyone running a hospital knows it. Hospitals are at 100% capacity at the moment and the onset of winter could be a nightmare. But beyond this, an accelerating financial disaster is in progress”, he writes.

Since 2010 the NHS has received annual budget increases of 0.8% while its costs have been rising at 4%-5% a year, and the shortfall has hit both hospitals and patients. “Spending is cut. Vacancies are left unfilled. Staff/patient ratios are relaxed,” says Smallwood. “Hospitals cut their capital programmes, which means fewer operating theatres and MRI scanners.”

Things are so bad that, despite delivering “miracles” in extra productivity, the NHS’s “costs cannot be reduced at this rate indefinitely. The system has reached a tipping point,” Smallwood adds.

He says NHS England’s chief executive, Simon Stevens, “did the NHS no favours when he said the [it] could manage with a budget increase of £8bn by 2020”. Much more than that is needed, Smallwood insists.

Smallwood also casts doubt on the chances of two key government NHS policies being delivered: a reduction in hospitals’ spending on expensive temporary staff, and the push for the NHS to become a fully seven-day service by 2020, which David Cameron has personally championed.

“By next year, hospitals’ deficits may have escalated to such a degree that the NHS could face widespread financial collapse. Since hospitals have to take out loans to finance their deficits, their accumulated debt will become so large that many could run out of borrowing capacity and cash.

“At this point, when they can no longer pay wages, the sort of financial crisis the NHS has never seen before will be unstoppable,” which would force the Treasury into a multibillion-pound bailout, he adds.

Hospitals bosses are now facing a stark choice: “[Spending] more money every year or a sustained decline in the standards of healthcare and a financial collapse.”

Prof Chris Ham, chief executive of the King’s Fund health thinktank, said everyone involved in the NHS would recognise Smallwood’s hard-hitting article as an accurate portrayal of a service struggling to cope with five years of the smallest budget increases in its history.

“Patient care is starting to suffer” and NHS leaders face an “impossible task” of either trying to balance their books or ensuring they have enough nurses and doctors to care properly for patients, Ham said.

He said there was “a real risk of a return to the 1990s, when patients had to wait 18 months or longer for planned operations”. Ham also said there was “no prospect” of introducing the seven-day NHS without more money.

The Department of Health declined to respond directly to Smallwood’s views but said it had agreed to give the NHS the money that Stevens said it needed.

“There is no denial that the environment is tough but the NHS must deliver its side of the plan with cost-controlling measures like clamping down on rip-off staffing agencies and expensive management consultants,” a spokeswoman said.

“Last year, the NHS was ranked as the safest healthcare system in the world by the Commonwealth Fund and although the NHS is busy, it has been preparing for winter for months and services are ensuring patients get treated quickly.”

Heidi Alexander, the shadow health secretary, said: “This frank and stark warning about a health service on the brink of collapse should be a wake-up call to Jeremy Hunt and No 10. The uncomfortable truth for ministers is that the crisis facing the NHS is one of their own making.”

A spokesman for NHS England said: “Each year the NHS faces greater demand on its services and it continues to successfully look after this growing number of patients. But there are real pressures and we must strengthen for the future which is why the NHS has produced a plan for change. We must deliver that plan, using more joined up models of care, backed by the correct funding settlement, as set out in the NHS’s five-year forward view.”