Staff at Birmingham's Children's Hospital were told their jobs were safe last night despite bosses admitting that new NHS payments were putting services under immense pressure.

Chief executive Paul O'Connor said the hospital would have to make "efficiencies" to prevent it losing an estimated £2 million as a result of new Government payment system.

Mr O'Connor, who is expected to announce later this month that the hospital has broken even with annual finances in the black, said children's hospitals offered specialist services which required greater funding than was currently being offered.

The current system, part of Tony Blair's structural reforms of the health service, pays hospitals for the treatment they carry out.

He said: "My concern is the extra costs in running special-ist services is not fully reflected in the tariff system.

"Our concern is that children and their families can't go two miles down the road and find another hospital doing the same thing. We are the only hospital that would carry out some of these services."

He said the children's hospital, which receives 40 per cent of its income from the tariff system, had to pay out more than general hospitals for specialist staff, including teachers, youth workers and play specialists.

He added: "This tariff system will continue to put pressure on the health service. For us we will finish with a balanced budget this year because we have a history of doing so. But some of our services are very expensive.

"Our message is we will continue to work at our high standard within this hospital. We have no redundancies planned but things are very difficult with the tariffs, which doesn't fully reflect the real cost of specialist treatment.

"Each year we see more and more children and each year we are required to become more efficient at finding ways of doing it without making people redundant, without cutting services."

The children's hospital, which treats 250,000 patients a year at a cost of £140 million, is one of four to lobby the Government about the tariff system.

The other three, Alder Hey in Liverpool, London's Great Ormond Street and Sheffield Children's Hospital expect to lose about £22 million during the next year.

They have written to Health Ministers Jane Kennedy and Lord Warner.