The “financially challenged” Royal Cornwall Hospitals Trust has begun what is being viewed as a make or break year with a rare piece of fiscal good news.

The trust’s lawyers have successfully convinced judges at an employment tribunal appeal hearing that the £1.2m payout awarded to former chief executive John Watkinson in 2010 was too high and, as a result, it has been cut by £300,000.

Mr Watkinson’s dismissal in 2009 sparked acrimonious legal wrangling after an independent report concluded the organisation was heading for “corporate failure”.

Mr Watkinson successfully sued for unfair dismissal, arguing he was dispensed with because of his opposition to plans to centralise upper gastrointestinal cancer services in a new centre run by Plymouth Hospitals Trust.

The trust is also challenging the tribunal’s finding that Mr Watkinson was a whistleblower.

While the legal saga is rumbling on, the service centralisation plans are complete. A recent review of the centre’s first year of work by the Peninsula cancer network reports “very positive results in terms of both patient satisfaction and mortality rates”.

The £300,000 from the employment tribunal is a drop in the ocean compared with the £19m Royal Cornwall needs to save during 2011-12 to break even and achieve foundation trust status.

The bulk of the savings is to come from a headcount reduction of 400 whole time equivalents from a workforce of about 4,383 by April 2012.

Its annual report also paints a bleak picture for the future, predicting the need for savings of 5 per cent a year for the following three financial years.