The King's Fund report found NHS leaders are cutting services, including patient transport, freezing recruitment and reducing agency staffing, and reducing investments in public health services such as health visiting and school nurses in order to reduce costs.

Siva Anandaciva, director of policy at The King's Fund, said: ‘The Government's ambition to deliver major reform for the NHS has never been more needed. To achieve that goal, ministers have previously said they will need to make tough trade-offs. Now is the time for realism about what can be achieved in the curent financial envelope and clarity about how the NHS should prioritise funding to deliver reforms versus maintaining the services people are currently using every day.'

The report follows an NHS Providers survey which found trusts were cutting jobs and services in order to balance their books in light of the expected £7bn financial deficit this year.

The King's Fund recommends NHS trusts are set multi-year budgets instead of the current annual approach to mitigate the risk that in-year financial pressures adversely impact patient care.

Matthew Taylor, chief executive of the NHS Confederation, called for ‘extra capital funding to unlock productivity improvements and continue to deliver patient care'.

Taylor added: ‘That is why we hope that next month's Spending Review will increase NHS capital investment and that the forthcoming National Infrastructure Strategy will open up much needed new routes for mutual investment from the private sector.'