The massive financial deficit in the NHS is a direct result of the government underestimating the cost of new staff contracts, according to the Conservatives.
The health service is facing a £620m deficit this year – three times higher than in 2004-5.
Some trusts have been forced to delay operations, close wards and impose recruitment freezes.
Shadow health secretary Andrew Lansley said the cost of pay rises for GPs, consultants and other NHS workers, under the Agenda for Change pay deal, had caused the financial crisis.
Lansley claimed the contracts had meant that up to three-quarters of the extra money being pumped in to the health service had gone on pay rises.
But health secretary Patricia Hewitt said she did not recognise the figures, adding the extra funding had paid for more staff.
“Some of these contracts have cost more than expected. But the important thing is that the health service is improving and will get better,” she said.