Health Secretary Patricia Hewitt has admitted she was "flabbergasted" to learn a Midland council is offering to lend #20 million to a cash-strapped hospital.

The loan means council tax-payers could foot the bill for bailing out debt-ridden hospitals, it was claimed last night.

Telford & Wrekin Borough Council is to provide the money in order to save 24-hour paediatric services at the Princess Royal Hospital in Telford, Shropshire.

The proposal was raised in the House of Commons by MP Mark Pritchard (Con The Wrekin), who said he feared the plan could lead to "a sharp rise in council tax".

But Ms Hewitt admitted she knew nothing about the scheme, which has been drawn up by local councillors.

The Princess Royal merged three years ago with the Royal Shrewsbury Hospital and managers promised at the time that services would remain at both hospitals.

But they are now planning to make major cuts, in an effort to tackle an historic deficit of #31.4 million.

If nothing changes, the debt is expected to grow by more than #2 million each year.

Shrewsbury & Telford Hospital NHS Trust has launched a consultation over plans to end 24-hour paediatric services at Telford.

It would mean the most serious cases, which require around-the-clock cover from specialists, would all be treated at Shrewsbury.

The borough council has drawn up plans to borrow #20 million from the Government, and then to lend the money to the hospital.

The authority, which put up council tax bills by 4.9 per cent this year, insisted there would be no cost to local residents because the hospital would pay the loan back.

But Mr Pritchard said he feared council tax-payers would end up footing the bill.

He said: "The hospital is in such debt already, when will it be able to pay this back?"

And he asked for reassurances when he challenged Ms Hewitt in the House of Commons.

The MP said: "Will she tell the House whether the borough council’s saying that it will help out with that debt will mean a sharp rise in council tax for the people of Telford and Wrekin, and, indeed, in Shropshire generally?

"Is it not time that the Government recognised that people pay their national taxes and deserve good services for it?

"They do not expect to suffer from yet another hike in next year’s council tax increases."

But Ms Hewitt told him: "I am somewhat flabbergasted by the honourable gentleman’s point."

She added: "I am not aware of the proposal made by his local council, but it appears to be a constructive proposal aimed at helping to protect services in the short term."

A council spokeswoman said: "The council wants to see the best possible health services for local people and may use its "power of well-being" to ensure that children’s services are unaffected by the proposed changes aimed at meeting health overspends at the hospital trust.

"One of the many options being looked at is the possibility of raising up to #20 million through a package of Government borrowing which local councils have access to and which are unavailable to the NHS."

The NHS would repay the money, "therefore resulting in no additional costs to the council tax payer in Telford and Wrekin."

The council has not yet formally approached the NHS Trust with the idea.

A spokesman for Shrewsbury & Telford Hospital NHS Trust said: "That is not a proposal we are involved in."

Meanwhile, Shrewsbury's MP said he was concerned about potential cuts to maternity services – after his daughter was born at Royal Shrewsbury Hospital three weeks ago.

Daniel Kawczynski (Con Shrewsbury & Atcham) became a father at the age of 34, with the birth of his daughter Alexis.

Speaking in the House of Commons, he praised the "superb" midwives but said they had warned him that maternity beds were to be cut.

He said: "What upsets me is that people come to talk to me in hushed whispers because they are absolutely petrified of losing their jobs.

"They do not want to go public because they work in a regime of fear, and they worry that, if they rock the boat, they could lose their jobs."