The extent of the financial woes engulfing the NHS was today laid bare when Patricia Hewitt admitted that the service had run £512m into the red in the last 12 months.

The gloomy statistic, which the Health Secretary revealed in a Commons statement at lunchtime, comes after months of internal strife and the loss of 15,000 NHS jobs.

Hours earlier, one of Britain's most senior doctors blamed government incompetence for destroying the NHS's finances. Dr Paul Miller, chairman of the BMA's consultants’ committee, said that billions had been wasted on ill-considered PFI initiatives and private treatment centres, and on profligate spending on management consultants duplicating the work of existing NHS managers.

The £512m debt - the figure is unaudited and excludes foundation hospitals - is lower than the half-year forecasts for a shortfall of £623 million published in December, but remains significantly higher than the £200 million overspend target then predicted by the Government.

It is more than double the £220 million deficit for 2004-5.

Ms Hewitt, who has been fiercely criticised by health workers for her handling of the NHS and faced ridicule earlier this year for suggesting that the NHS had enjoyed its "best year ever", stressed that the overspend represented 0.8 percent of the NHS's overall budget.

"The end of year position is the equivalent of a person on an annual wage of £20,000 overspending by around £160," she told a news conference. "It's a problem, but a manageable problem."

She promised that the NHS would meet its spending targets next year, and said that this would not be accompanied by a deterioration in patient care. "There should be no trade off between patient care and sound financial management - they go together," she told the House.

Ms Hewitt added that one tenth of the country's NHS Trusts were responsible for two-thirds of the overspend. She admitted that "difficult decisions" remained and that Trusts facing the heaviest debts would need to cut more jobs, but denied that this would lead to a "wholesale reduction" of staff.

This morning Sir Ian Carruthers, acting NHS chief executive, published an upbeat NHS annual report, in which he spoke of a revolution in patient care with waiting times at a record low, death rates from cancer and heart disease falling, and stroke, mental health and elderly people’s services getting better.

Ms Hewitt said: "The NHS is treating more patients and saving more lives than ever before, but of course there is more to do. Sir Ian's report today shows that the NHS is on the right track."

Andrew Lansley, the Shadow Secretary of Health, accused Ms Hewitt of living in a parallel universe and warned that similar unaudited figures published last year proved to be 80 per cent lower than the actual debt.

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