Managers of Oxfordshire's major hospitals claim their £340m budget for next year is so tight that compromises will have to be made if patient services are to meet Government standards.

The Oxford Radcliffe Hospitals NHS Trust, which runs Oxford's John Radcliffe Hospital, the Churchill and Radcliffe Infirmary, and The Horton Hospital, Banbury, will have a ten per cent increase in funding for the next financial year.

But finance director Chris Hurst said 2002-03 would still be a difficult year if the trust was to reach Government targets, including reducing waiting lists.

He said: "We're trying to reduce waiting times and things like that, but we will have to make some difficult compromises as a result.

"The Government says certain things must be delivered. If the money is not sufficient, and the early indications are that there will be a gap to close, we will have to find ways to reach these targets."

Mr Hurst's comments followed news that hospital trusts in the South East have been asked to make cuts to prevent a £60m overspend before the end of March.

NHS regional chief executive Ruth Carnell said in a letter to trusts: "I cannot emphasise enough the seriousness of our financial position and the impact it has on a national level."

Mr Hurst said the trust would not be making many cuts. He said it was told to make savings of £4.5m at the beginning of this financial year, last April, and had already saved £5.4m.

Mr Hurst said: "We tried to do it in a way that didn't impact on patient care and since then, we have said that we're going to break even. Now, in the short term, we will have to slow down spending."

A number of factors have contributed to rising costs in the NHS. Junior doctors are now paid overtime if they work more than 50 hours a week and the cost of drugs is also rising.