HEALTH chiefs in Lancashire are struggling to plug a black hole in their finances -- and expect to be £12.5million in debt by April.

A report out today says nationally the NHS is struggling to find £500million -- with parts of the country embarking on cuts, recruitment freezes, and redundancies, as finance directors frantically try to balance the books by the end of March.

And Cumbria and Lancashire Strategic Health Authority, the body in charge of health services across the North West, is one of the 28 SHAs across the country which admits it is facing a bleak outlook.

The report comes just a day after The Lancashire Evening Telegraph revealed up to 70 jobs could go from East Lancashire hospitals in a bid to balance the books.

East Lancashire Hospitals NHS Trust has already admitted it is £5.5million in debt, prompting the job losses.

Now the SHA has said it is £8million in the red -- and expects that figure to rise to £12.5million by the end of the financial year.

And experts believe health authorities will have to make more cuts if they are to get rid of the deficits.

A survey by the Health Service Journal has revealed that the NHS is facing its bleakest outlook for years, with half of strategic health authorities expecting their areas to be in debt at the end of the financial year -- even though they are obliged to break even by then.

But a spokesman for the Department of Health today insisted the difficulties could be resolved, and that Health Secretary John Reid expected organisations to balance the books.

The spokesman said: "It is not unusual for the NHS to be reporting deficits at this time in the financial year. Past experience has shown that the overall position has improved by year-end."

But Shadow Health Secretary Andrew Lansley blamed the problems on the cost pressures of government-imposed targets.

"If hospitals continue to bear government-imposed costs and bureaucracy, deficits will grow and frontline services will continue to suffer," he said.

Of the 27 SHAs that provided figures to the HSJ, almost half do not expect to break even by the end of March 2005. Overall, trusts have approximately three months to find around half a billion pounds.

Cumbria and Lancashire SHA finance director Geoff Minns said: "We are not expecting to break even, but will be within the controlled total that the Department of Health has given us. They are allowing us to overspend by £12.5million."

Health Service Journal columnist Noel Plumridge, a former trust finance director, is sceptical about SHAs that claim they will be able to break even, despite massive overspends.

He said: "Either some of these SHAs are going to do something heroic in the next four months, or they have a huge amount of money in their back pocket.

"Service cuts will be needed in many trusts if they are going to break even."