Two hospitals with six-figure debts have admitted they are still losing £1 million a month.

Worthing and Southlands Hospitals Trust has already had to rely on a £4.7 million loan to pay tax and national insurance contributions to the Inland Revenue.

Now finance director Lovat Timbrell has told board members in a report on the worsening financial situation: "Should this continue, then the ability to pay salaries will be impaired early next financial year."

In an apparent about-face, the trust moved quickly to reassure staff yesterday that salaries were not under threat.

Senior officials said at a Press briefing there was absolutely no danger of staff not getting paid.

But they admitted they were planning to cover wage payments with a loan which has not yet been approved.

The trust, which employs 3,500 people and has an annual income of £130 million, says salaries will be paid regardless of the outcome of the application but managers have not identified an alternative source of cash.

Mr Timbrell said the trust faced a deficit of £6 million in the financial year to March 31.

In a report to the board, Mr Timbrell said: "The trust continues to attempt to meet all payments due on demand but the cash situation has worsened, primarily due to the continuing monthly income and expenditure deficits to the order of £1 million a month.

"The Trust has received £4.7 million from the Strategic Health Authority and this will be used to pay PAYE and National Insurance due to HM Revenue and Customs in February and March.

"The inability to pay this from our own generated resources underlines the seriousness of the financial position.

"Should this continue, then the ability to pay salaries will be impaired early next financial year."

The trust's money problems are linked to an increase in the number of patients, a high demand for agency workers and a rise in drug costs.

Changes in the way staff are paid and cuts in the hours junior doctors are allowed to work, which have led to the need to recruit more staff to cover the hours once filled by juniors, has increased the pressure.

The trust recently imposed a ban on employing agency staff after the annual bill went up from £2.8 million in 2004/05 to £3 million this year.

But health managers had been forced to employ some agency staff to cover workloads increased by several factors including a winter diarrhoea and sickness bug.

Mr Timbrell also warned the trust no longer had the ability to pay suppliers on demand.

He said: "Inevitably, the deficit, if left unchecked in the coming months, will lead to occasional suspension of services until stocks can be replenished after suppliers have been paid."

Mr Timbrell added: "Clearly there is a lot of work that needs to be done in terms of financial recovery.

"Things are tight."