Government plans to reorganise the health service in Oxfordshire threaten months of upheaval as it grapples with massive debts.

The Thames Valley Health Authority, now faced with presiding over job cuts as the size of its deficit grows, is to be abolished.

Instead, it will form part of a giant new strategic NHS authority, including Hampshire and the Isle of Wight.

The announcement by Health Secretary Patricia Hewitt followed a meeting at Downing Street with NHS trust chief executives.

The number of strategic health authorities nationally will be reduced from 28 to 10. Miss Hewitt said the shake-up would streamline management and administration and reduce bureaucracy.

The new strategic health authorities will be established in July, leaving Oxfordshire health managers facing their second major NHS shake-up in three years.

And it comes as the size of the deficit facing the Thames Valley is estimated at being between £35m and £82m.

The new NHS authorities are similar to the regional offices of the NHS, abolished in 2001.

Miss Hewitt said equally important changes were imminent, with a planned reorganisation of primary care trusts and ambulance trusts to be announced shortly.

Mark Ladbrooke, chairman of Unison's Oxfordshire Health branch, said the union had unsuccessfully fought for a postponement of cuts in wards and community hospitals during the consultation on the reorganisation.

He said: "It could be some of the cuts that will be proposed over the next few weeks will be sharper as a result of this. We are told the reorganisation will result in savings of £9m in the Thames Valley, but I am in no doubt that this is going to cost money in the short term."

Spokesman for Thames Valley Health Authority, Kevin McNamara, said that the authority welcomed Miss Hewitt's announcement.

He said: "It represents the best way forward in ensuring local health services have the right support in the future to meet the changing health needs of the local population.

"Over the coming months, Thames Valley SHA will be working with Hampshire and the Isle of Wight SHA to ensure a smooth transition. Significant savings will be achieved through this reorganisation.

"We have been working together to reduce the possibility of redundancies through vacancy freezes and natural wastage on management and administration posts. Significant savings will be made through a reduction in very senior posts and, where possible, alternative positions will be found for staff with the aim of keeping redundancies to an absolute minimum."

The authority is now hoping that the five primary care trusts in Oxfordshire, formed in 2002 to oversee community services like GPs and dentists, will be merged by October. The spokesman said public consultation showed support for one ambulance trust covering Thames Valley and Hampshire.