The Conservatives charged today that the National Health Service was in crisis after its chief executive said that he was standing down to take early retirement.

Sir Nigel Crisp, 54, announced his departure in a statement acknowledging that "not everything has gone well" in his five years in the post and that he was "particularly saddened" by the recent financial problems facing the NHS, which is facing a record overspend despite massively increased budgets.

Figures released last year showed that a quarter of NHS trusts were in deficit by a total of almost £1 billion, although the total net deficit across all NHS bodies was £623 million because some were in surplus.

Although that figure represents less than 1 per cent of the total NHS budget of around £76 billion, overspending trust managers have been ordered to cut back to sharply reduce the deficit before the next financial year starts in April.

Sir Nigel, who has also been permanent secretary at the Department of Health, will be granted a peerage on the personal recommendation of Tony Blair, who paid tribute today to Sir Nigel's achievements at the NHS.

The Prime Minister said: "For 20 years Sir Nigel has served the NHS with distinction and honour. Since becoming its chief executive in 2000 he has led the Department of Health and the service through a period of radical change.

"In this time there has been great improvement in the services provided by the NHS for the people of England. Maximum waiting times for in-patient hospital admissions have reduced from a maximum of 15 to six months and are still falling. The NHS now has over 60,000 more nurses and 20,000 more doctors.

"When he took over the question was, could the NHS survive. The question now is how to entrench the improvements. These are important achievements that Sir Nigel should take great pride in."

But Andrew Lansley, the Shadow Health Secretary, said that Sir Nigel was being made into a scapegoat for problems inflicted by ministers. "Sir Nigel’s rushed departure is a clear admission that the NHS centrally is in a crisis. Ministers can try and blame Sir Nigel but they are responsible," he said.

"The NHS is plunging into the red because ministers raised costs and pushed targets without regard to the overall impact on services.

"Chaotic upheaval in the NHS has left managers at every level in despair. New leadership for the NHS is important but the need for political leadership and direction is even more urgent."

Sir Ian Carruthers, a senior Department of Health, will take over as acting NHS chief executive, while Hugh Taylor becomes acting Permanent Secretary.

In his statement, Sir Nigel said: "Looking back over the last five years, I am proud that the NHS has achieved or exceeded the challenging targets it has been set. Over this period, people have made enormous changes in the NHS.

"Where it matters, at the front line, the old hierarchies are breaking down and outdated practices are changing. But not everything has gone well. I am particularly saddened by the difficulties we have had over the last few months and the financial problems we are grappling with. As chief executive, I wish to acknowledge my accountability for problems just as I may take some credit for achievements.

"Looking forward, I have concluded that, despite these problems, the timing of my retirement is right for the NHS. We have built a good foundation but this is a very big moment of change. The NHS needs a chief executive who can give leadership over several more years. My departure will allow new leaders to be appointed at the same time in the department and in strategic health authorities, to work together to continue reform and improvement."

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