A TROUBLED North-East hospital trust, which is shedding hundreds of jobs to tackle a £56m deficit, yesterday confessed that it had lost control of its finances.

Simon Pleydell, chief executive of South Tees Trust, blamed the confusion caused by a merger and a move to a site in Middlesbrough for the crisis it is still trying to deal with.

He told a committee of MPs investigating deficits across the NHS: "The trust was having a debate with itself, not reducing costs."

Mr Pleydell was called to give evidence, on behalf of the trust, to a health select committee inquiry into the state of NHS finances.

The trust runs the 1,000-bed James Cook University Hospital, in Middlesbrough, and the Friarage Hospital, in Northallerton, North Yorkshire, which care for patients from across the region.

South Tees officials have been wrestling with money problems for some time. In 2004/2005, it missed financial targets, reporting an £8.9m deficit, despite a £12m loan from the regional NHS.

That support was then withdrawn. Trust officials were asked to repay the loan and curb spending.

Yesterday, Mr Pleydell described the financial shortfall as a "£56m problem".

South Tees succeeded in cutting £35m from its budget to break even in 2005/2006, but only by cutting 300 posts - nearly five per cent of its 6,800 staff.

It is still left with an "historic" debt of £21.7m, which will not be paid off until 2009 and is still being negotiated with local primary care trusts (PCTs).

Asked yesterday by the all-party committee to explain why it got into difficulties, Mr Pleydell, who took up his post in 2003, blamed:

* The 2003 move to the James Cook University Hospital, which involved the equivalent of moving "11,000 households" from two hospitals that closed at the same time;

* The merger with the Friarage Hospital, in Northallerton, which Mr Pleydell described as a "disruptive factor in any organisation".

* An extra £6m bill for consultants to carry out operations privately, after an unexpected rise in the need for emergency treatment;

* The extra £3m annual cost of paying higher salaries to consultants under new contracts.

Referring to the move and the merger, Mr Pleydell said: "They contributed to what we now see, looking back, as a loss of real control of our financial position.

"My task was to make sure people recognised our destiny was in our own hands."

Earlier this month, Health Secretary Patricia Hewitt was accused of "incredible mismanagement" after it was revealed NHS bodies overspent by nearly £1.3bn last year.

End-of-year accounts revealed a third of health trusts were failing to break even - with 12,450 redundancies announced so far.

In the wake of South Tees's problems, the Government has ordered "turnaround teams" to help sort the problems out.

The trust, which employs more than 7,000 people, has an annual budget of £320m