The NHS crisis intensified yesterday as Birmingham Children's Hospital announced the closure of a ward and health staff raised the spectre of nationwide strike action.

Dave Prentis, general secretary of Unison, warned that health workers would have "no option left" if health service spending cuts continued.

The Royal College of Nursing also warned of a "mood change" among its members and the possibility of nurses taking industrial action.

The warnings came as it emerged the Australian government had launched a recruitment drive to snap up unemployed British nurses, including an estimated 4,000 in the West Midlands.

The impact of the funding crisis continued to grow as Birmingham Children's Hospital launched a consultation on plans to save #800,000 by axeing most mental health services at its city centre site.

The Children's Hospital will tonight present proposals to move all in-patient mental health services from its city centre facility to Parkview Clinic in Moseley, at a public meeting.

Last week the hospital warned it may have to cut treatments because of a #2 million funding shortfall.

A spokeswoman insisted no decision had been made, although the transfer of services was the preferred option.

She said: "There will be no job losses or loss of capacity."

The cash crisis could also hit plans for a new hospital in Stoke-on-Trent.

The board of University Hospital North Staffordshire NHS Trust last night met to discuss plans to downgrade the proposed #450 million facility, which has been on the drawing board for seven years.

It would replace two existing hospitals, which are both about 100 years old. However, the health trust is in such dire financial straits that the proposal may need to be scaled back.

There was one piece of good news for the Government, as a damning report by an independent financial watchdog blamed poor management for the cash crisis in Stoke which led to the loss of 1,000 jobs.

The Audit Commission said "failures in governance arrangements" at University Hospital North Staffordshire NHS Trust had led to a deficit of #15.5 million.

The report backs the Government's claim that NHS deficits are at least partly caused by poor local management.

Ministers point out that NHS funding has almost tripled from to #33 billion in 1996-7 to more than #90 billion allocated for 2007-8.

However critics have pinned the blame on Government reforms.

Ann Leedham-Smith, director of the Royal College of Nurses for the Midlands, yesterday accused the Government of demanding "change for change's sake".

She said: "Just let us get sorted with one set of reforms, evaluate, and then reform."

She added that NHS trusts had ceased overseas recruitment last year but the Australian government was set to launch a recruitment drive next month to lure British nurses.

At the RCN's annual conference in Bournemouth, general secretary Dr Beverly Malone told delegates Ministers needed to "wake up and smell the coffee".

Dr Malone said RCN members had also considered stopping working unpaid overtime - which added up to an extra day per week for each nurse.

The action - which would amount to Work to Rule - was a "heavy tool" and was something that was "way down the line" she added.

Meanwhile, Health Secretary Patricia Hewitt received a rough ride from health workers when she delivered a major speech to delegates at a Unison conference in Gateshead.

Some of the delegates shouted out "rubbish" and booed and hissed sections of the Minister's speech.

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