Oxfordshire's largest hospital trust could have surplus cash in its coffers at the end of the next financial year - for the first time in its history.

If the prediction is fulfilled, March 2008 could be the first time the Oxford Radcliffe Hospitals NHS Trust has not had to grapple with debts since its formation in 1994.

The news came as the ORH appeared to be managing its 2006-7 target by not exceeding a planned £9m deficit, following a 12-month drive to make £33m of spending cuts.

With one month to go, the accumulated deficit was £8.8m.

Trust finance director Chris Hurst said he had made his positive calculation for next year's budget, because staff had proved they could be more efficient.

He explained that as well as taking cost-cutting steps throughout the past year, the trust had also had to cope with two other issues, which had cut £16.5m from the budget.

First, to combat the growing debts across all NHS services in the county, the Thames Valley Strategic Health Authority ordered the ORH to reduce its charges to primary care trusts by nine per cent - cutting its income by £9.5m.

Then, the now-defunct health authority ordered the trust to repay £7m it had been given to solve previous deficits.

Mr Hurst said: "Without these two issues, we would have been £7m in surplus this year. So next year we should have a saving, because it shouldn't be as difficult as this year.

"Although it's been difficult, there have been some benefits. We have learned a lot about improving performance and that stands us in good stead to make more improvements next year."

But Dr Helen Groom, secretary of Oxfordshire's Keep Our NHS Public Campaign, argued that the ORH would be even better off without an annual £36m bill for building projects at the JR and Churchill Hospitals.

Both the JR's West Wing and the cancer centre at the Churchill are being funded through controversial Private Finance Initiatives, where commercial groups fund and build NHS units before becoming landlord for 30 years.

During that time, health trusts have to pay annual fees for rent and maintenance.

Dr Groom said: "Whilst acknowledging that the ORH is on a firmer financial footing, one has to question the management of an NHS that dictates such big swings in finances.

"Given that the contracts with the PFI companies for the buildings can't be cut, it's always the staff, and therefore the services, that go.

"How much more could we be doing if the ORH wasn't paying £36m a year for the new buildings at the JR and Churchill sites?"