AN NHS quango that employs more than 3,000 people in the region is to be abolished.

The Prescriptions Pricing Authority (PPA), in Newcastle, is to be axed by Health Secretary John Reid as part of reforms designed to save at least £500m.

The PPA, which employs about 2,500 people in Newcastle and 1,000 in Durham City, has been a major employer in the region for decades.

But officials at the PPA are hoping that job losses can be avoided as part of NHS structural changes that will see the authority become part of a larger body.

A smaller NHS organisation employing 13 people, the Harrogate-based Family Health Services Appeals Authority, is also being axed.

It is not clear whether staff based in North Yorkshire will lose their jobs or whether the authority will become an arm of the London-based NHS Litigation Authority.

As part of the reforms, the PPA and the NHS Counter Fraud and Security Management Authority will be abolished and their functions taken over by the new NHS Business Services Authority.

Kirsty O'Callaghan, spokeswoman for the PPA, said: "We are still waiting for the implementation details, which will be given to us in October, but there are no plans for any redundancies within this region.

"We are quite positive about the changes."

Paul Burns, chief executive of the appeals authority, which has been operating from Harrogate since 1991, said: "The department has said we are too small to continue as a special health authority."

Recent announcements on the need to move civil service jobs out of the capital in the interest of economy may work in the Harrogate team's favour.