The row risks derailing the timescale for NHSE abolition and cutting ICB costs by 50%.

A report in The Times said the Treasury had offered to pay for half of the costs in return for the DHSC absorbing future strikes by junior doctors and higher medicines prices as part of a deal with the US.

ICBs have paused or delayed their redundancy programmes due to the stand off.

NHSE chief executive Sir Jim Mackey has conceded ICBs may be given a longer timeframe to make redundancies due to the impasse.

The disagreement could also potentially derail the Government's two-year timeframe for NHSE abolition.

Helen Morgan, Liberal Democrat spokesperson for health and social care, told HM: ‘This is chaos at the heart of the Government, ministers fighting over who pays the bill while patients wait longer for care.

‘The idea that the NHS could be forced to pay higher drug prices to please Donald Trump is a national scandal. Money will be diverted from vital frontline care and patients will pay the price. 

‘Our health service should never be a bargaining chip in a backroom trade deal.

‘While Labour ministers squabble, NHS staff are stuck in limbo and patients are suffering. The Government needs to come clean, stop the infighting and put patients before politics.'

Matthew Taylor, chief executive of the NHS Confederation, said: ‘Health system leaders have been tasked with making significant savings in order to put the NHS on a sustainable footing. These will require very tough decisions.

‘However, many integrated care boards have been forced put their redundancy programmes on hold for a number of months now due to a lack of clarity of how these job cuts will be funded. This not only risks them being unable to make the savings planned for this financial year, and will likely have a knock-on effect into next year.

‘ICS leaders continue to be very concerned that if the NHS has to cover the estimated £1bn redundancy bill itself then our members will have to make drastic decisions over whether to cut frontline staff or funding and reduce activity levels, including operations, in order to cut costs. 

‘We hope that all parts of the Government and the NHS can reach an agreement over how this programme can be funded so that leaders can get on with the cost-cutting plans they have been tasked with.'