Two hundred beds and 900 staff posts are to go at University Hospitals of Leicester trust - despite the organisation expecting to be £13m in the black this year.

But the trust says a projected£44m budget cut will not have any effect on its planned private finance initiative project, which has already been scaled back by£200m.

The trust is planning to close entire wards - focusing closures on those that provide the worst environment for patients - as it brings bed numbers down from 2,027 to 1,826 by March 2009. This would be in line with the bed numbers planned under the£711m PFI project, which involves a mix of new-build and refurbishment. Final contracts on the project have yet to be signed.

Most of the 900 posts that will go among its 12,500 staff over the next two years will be lost through natural wastage. However, it is expected there will be around 200 redundancies, mainly among management and administrative and clerical staff.

While the trust has balanced its books for several years, the local health economy is facing a predicted deficit of£32m. UHL has saved£35m across the trust in the last 12 months, but 'needs to redouble its efforts to make Leicester's hospitals even more efficient', said chief executive Peter Reading.

He said savings would be made by providing more care outside hospital, shorter hospital stays and changes to education, training and research budgets, leading to a cut in the budget of around£44m.

But Dr Reading said the shift to care closer to home would benefit patients and ultimately the taxpayer, although 'Leicester's hospitals will become smaller and more specialised'.

However, critics say that community services in the area are relatively under-developed.

Trust staffside chair David Morgan commented: 'We do not accept the premise of the cuts... We do not believe the primary care trusts will be able to set up the community services to replace the high-quality dedicated and responsive services provided by UHL.

'We are starting meetings this week with management to discuss their proposals. We hope we can stop this. We have always questioned the affordability of the PFI project. They will be paying£81m a year for 30 years.'

Leicester City PCT chief executive Tim Rideout said it was investing£3m in community services in 2007-08 to avoid unnecessary appointments at hospital and move care closer to home. Plans include six more community matrons and more GPs providing a primary care-based musculoskeletal service.