A FINANCE chief has said East Lancashire's hospital authority could be out of the red by April after three years of racking up debts of more than £10million.

East Lancashire Hospitals Trust is on course to overspend by about £2.5million this financial year but for the first time bosses are to wipe this out immediately with cash from its reserves.

The £8million the Trust overspent since being formed in 2003 will be paid back by the end of March and it is hoped NHS paymasters will not ask for a further £10million loan to be repaid.

This would leave the authority breaking even for the first time since it was formed.

But Trust bosses said the authority faced a massive challenge to never again run into debt by saving an unprecedented £12million during the next financial year.

Director of finance, Stephen Brookfield, said: "In the last three months good progress has been made in financial management in the major divisions and budget managers must be congratulated for that.

"Obviously, the challenge for the coming financial year will be very difficult but we will continue to work as an organisation to deliver these savings."

The Trust is on course to overspend by about £2.5million for 2005/06. Previous annual overspends were £3.9million, which is now paid back and £4.025million.

The lower overspend for this year was due to the success of a £7.5million savings programme, Mr Brookfield said.

This year's debt will be paid off with Trust reserves but £12million must be saved from April because expenditure is greater than income a problem throughout the NHS.

And bosses do not know if £10million given to the Trust by the Cumbria and Lancashire NHS Strategic Health Authority which oversees all NHS care in the two counties will need to be paid back.

Mollie Manthorpe, chairman of the Patient and Public Involvement Forum said: "We are pleased that it is beginning to be addressed and hope that it won't happen again.

"Our concerns are that patient services do not deteriorate. A sum like £12million does seem a tremendous amount."