The company behind Britain’s first privately run hospital said it planned to pull out of its contract to run Hinchingbrooke in Cambridgeshire as it emerged that A&E performance across NHS England had plunged to a record low.

Circle Healthcare blamed funding cuts and increased demand for A&E services at Hinchinbrooke as it emerged A&E performance across the NHS in England sank to its worst level ever last week with just 79.8% of patients treated within four hours over the New Year break. The NHS constitution states that 95% of all A&E patients should be dealt with within four hours.

Circle Holdings issued a statement to the London Stock Exchange blaming funding cuts, a surge in demand for accident and emergency services and a failure to deliver “joined-up” reform between health and social services. It said the company had entered into discussions with the NHS Trust Development Authority “with the view to ensuring an orderly withdrawal from the current contract”.

The statement lobbed a politically charged hand grenade into the election campaign with Labour’s health spokesman, Andy Burnham, criticising the government for agreeing a “risky” business model with Circle, and his Conservative opposite number, Jeremy Hunt, accusing Burnham of “playing politics” with the issue.

Hunt highlighted Labour’s role in deciding to hand the hospital to the private sector. Burnham inherited the decision to call in the private sector at the troubled hospital when he became health secretary in June 2009 but was in office when a shortlist of three providers, including Circle, was drawn up in March 2010 on the eve of the general election. Circle was selected as the preferred bidder in November 2010 by the coalition and awarded the contract a year later.

Hunt tweeted: “Disappointing news on Hinchingbrooke, but @andyburnhammp must stop playing politics – he signed off decision to allow private sector operator.”

The health secretary defended the government’s decision to use the private sector to improve services. He added in a tweet: “This [government] makes no apology for seeking solutions for failing hospitals. We won’t be deterred from tackling poor care & driving up standards.”

The prime minister’s spokeswoman said: “There is disappointment that Circle has made this decision. The priority and the focus now is to make sure that patient care is not affected while the trust development authority transfers the running of the trust.”

The figures released on Friday by NHS England also show a sharp escalation in other problems experienced by the service over the festive period, especially in the week including and just after the new year.

A total of 29,388 ambulances had to queue for at least 30 minutes outside an A&E unit in England in the three weeks between 15 December and 4 January, and were unable to discharge the patient in the back to A&E staff, because the emergency department concerned was so busy.

That was more than double the 12,615 such incidents in the comparable three weeks in the winter 0f 2013-14.

Similarly, far more planned operations such as hernia repairs and cataract removals had to be postponed over the last three weeks because of the huge pressure hospitals were under. In all, 3,771 elective procedures were called off, compared with 2,016 such surgeries the year before.

The number of patients that had to be diverted from one A&E unit to another because the hospital they initially arrived at was so busy also rose year-on-year from 39 to 75.

Bedblocking also reached new record levels. Over the past three weeks, 43,426 beds were occupied by mainly frail, elderly patients who could not be safely discharged, despite doctors having passed them as medically fit to go, because of a lack of social care provision. That was also significantly up on the 33,055 delayed transfers of care seen in the same three-week period last winter.

However, despite A&E units coming under intense, sustained pressure recently, none has had to close temporarily, a situation that sometimes occurs when a hospital cannot cope. Two A&Es have had to shut their doors to patients this winter, though none since 11 December.

The weekend of 2-4 January, just after the New Year celebrations, saw some of the worst-ever performance by the NHS on these other performance indicators.

That may reflect the fact that many GP surgeries were closed or that hospital staff were on holiday or other factors.

For example, over those three days a total of 4,848 ambulances had to queue outside A&E units for at least half an hour, while 33 hospital trusts experienced what NHS England calls “operational problems” trying to cope with demand.

Circle’s threat to pull out compounds the headache for the Conservatives posed by worsening A&E performance across England because it focuses more attention on the government’s reorganisation. The company said that funding for Hinchingbrooke Health Care NHS trust had been cut by about 10% for the current financial year and that the company had spent £4.84m to support the trust. Circle is allowed to withdraw from the contract if it spends more than £5m.

A report by the Care Quality Commission’s new regime is expected to be highly critical of the hospital. The Circle statement said the report’s conclusions, which follow a preliminary report last year, would be unbalanced and that it would contest many of them. In preliminary findings released in September, the CQC reported that patients at the hospital were being neglected, hygiene was inadequate and Hinchingbrooke was facing staffing problems.

Steve Melton, Circle’s chief executive, said in a statement: “Like most hospitals, over the past year, Hinchingbrooke saw unprecedented A&E attendances and not enough care places for healthy patients awaiting discharge.

“At the same time, our funding has been cut. We also believe that inconsistent and conflicting regulatory regimes compound the challenge for acute hospitals in this environment. This combination of factors means we have now reluctantly concluded that, in its existing form, Circle’s involvement in Hinchingbrooke is unsustainable.”

Facebook Twitter Pinterest The entrance to Hinchingbrooke. Circle said its franchise to operate the hospital trust was not sustainable. Photograph: Chris Radburn/PA

The statement by Circle Holdings goes to the centre of many of the issues highlighted by Labour as it seeks to place the NHS at the heart of the election debate. The statement by Burnham was carefully phrased – and lacked his usual robust language attacking the government – because Labour knows it is vulnerable to the charge that it set in train the process that allowed Hinchingbrooke to become Britain’s first privately run hospital.

Burnham said: “Patients who rely on Hinchingbrooke will be worried about their hospital following this announcement and ministers must provide urgent reassurance and set out a plan to ensure the continuity of services at the hospital in this uncertain time. It was the decision of the coalition in November 2011 to appoint Circle and they must take responsibility for this mess.

“The government were explicitly warned two years ago about the risky business model Circle were operating, but failed to take any action. Given that these risks were known at the outset, ministers must explain why they judged Circle a safe choice to run this hospital. They must also set out today how long they have known about the problems at Hinchingbrooke.”

Burnham would like to focus attention on the coalition’s decision to pick Circle to run Hinchingbrooke and on the deal that was agreed after it was named the preferred bidder in November 2010.

Circle said in a statement: “We believe that solving the problems facing Hinchingbrooke can only be achieved through joined-up reform in Cambridgeshire across hospitals, GPs and community services. We fully support the vision of NHS England chief executive Simon Stevens’s Five Year Forward View, but these proposed reforms are too far into the future. If reform in the region develops fast and a new role for us does become clear, we are happy to play our full part.”