The BBC's Niall Dickson: "The balance sheet doesn't balance"

Health service managers say the final bill could be almost twice as bad, meaning cutbacks in services for patients and possible problems paying staff.

The British Medical Association has responded by calling for a thorough review of financing of the NHS.

But Health Secretary Alan Milburn denies there is a problem and says the NHS's financial position has much improved under Labour.

Approximately half of all health authorities and NHS trusts in England took part in the survey carried out by the Healthcare Financial Management Association (HFMA).

The association found that 48% of trusts were in deficit - with a forecast debt of more than £75m.

Only 8% of health authorities said they were in the red.

But 31% forecast they would be in debt next year, with a combined shortfall of £60m.

Cuts were saving some money - but extrapolating the figures across the NHS in England, the HFMA says the total deficit this year could be more than £200m.

The HFMA is also worried that the extra money pledged by the government for next year has already been swallowed up by extra pensions contributions, costs associated with the working time directive, and cutting junior doctors hours.

Eric Morton, HFMA chairman, said: "The comprehensive spending review in July 1998 pledged significant resources to the NHS.

"It is clear in the current year that unprecedented cost pressures have absorbed much of these extra resources.

"Health authorities and trusts in England now face the prospect of an aggregate deficit of over £200m this year.

"Prospects for next year are equally bleak. Once again new money is likely to be almost absorbed by unavoidable cost pressures."

He added that, although the deficit was not huge in itself, it showed the NHS was moving in the wrong direction and said the problems had to be addressed early.

He said: "That may be extending new services, developing additional outpatient services, and possibly even impact on our ability to hit the waiting list targets that we signed up to, to which we are all committed."

BMA calls for funding re-think

BMA council chairman Dr Ian Bogle says a complete re-think is needed in the way the NHS is financed.

Health Minister Alan Millburn talks to the Today programme

Dr Bogle would prefer the money to come from public funds - but he believes it is important that all options should be considered.

He told News Online that doctors were struggling to keep up current standards of quality, let alone implement the uniform standards of excellence demanded by Health Secretary Alan Milburn.

He said: "We need to decide as a nation what amount of money is needed to run the health service, how much we want to give, and what level of service we want to get from that money."

But Health Secretary Alan Milburn denied the NHS was in financial turmoil.

Dr Ian Bogle wants a review of NHS funding

He told BBC One's Breakfast News that it was too early to predict what the position of health authorities would be by the end of the financial year and that, even if they were £200m in debt, it would be far short of the £500m a year debt it inherited when it came into office.

And he said that, if there was a £200m debt, it would be "swamped" by the extra investment the government was planning in the NHS.

Mr Milburn added that the government had given the NHS "the biggest cash injection in its history", had brought waiting lists down, was modernising the NHS and had begun "the biggest hospital building programme" in the health service's history.

And he said the government faced a choice between the "Conservative" option of forcing people to take out private health insurance or "properly funding the NHS" while modernising it.

But Conservative health spokesman Liam Fox called Mr Milburn's "complacent" and accused him of dealing in "fantasy politics".