A health authority has threatened three trusts with job cuts after two of them refused to merge.

First Community, the Foundation and Premier Health in Staffordshire had been discussing options for an overhaul since April last year. But when they failed to agree, they decided last month to remain separate.

Premier Health was in favour of the move, with the other two against.

Brian Aird, chief executive of South Staffordshire HA, said the aim was to 'achieve a consistent model and level of mental health services across the district' and help the units support recent changes in primary and community care. He added that, based on the results of other mergers and the trusts' management costs, it would have saved pounds1m.

But Graham Rose, chief executive of First Community trust, said: 'In terms of patient benefit there wasn't anything that was proven to justify the sort of upheaval that would be involved.'

Amanda Godfrey, service development manager of the Foundation trust, agreed. 'We provide specialist mental health services. If you had a jointly managed trust you'd lose the specialist focus.' She also contradicted the HA's figure of pounds1m savings, arguing a new, bigger trust would need more district managers.

But Diane Rawle, chief executive of Premier Health trust, said: 'We are already a combined trust and we have had advantages through having community, mental health and learning disability services together.'

Mr Aird said he was 'extremely frustrated' at the decision. 'We have spent a year in discussions and moved precisely nowhere.'

The HA has told the units they must still cut pounds1m over three years as part of a plan to save pounds9m from its overall budget in anticipation of funding shortfalls.

It has warned the trusts against cutting services and plans to set percentage targets for management costs. Mr Aird said: 'In the case of two, their management targets are over the regional average.'

But Ms Godfrey said: 'We are already running as tight a ship as we can.'

And Mr Rose said the savings could not be met purely through management redundancies.

Mr Aird said the authority would also 'push through' plans for joint working on mental health similar to an existing scheme, whereby two of the trusts worked together on elderly mentally ill services. He denied these moves amounted to a merger 'through the back door'.