He said: 'After a decade of unprecedented spending, the NHS could face drastic cuts after 2011. This report backs up our analysis which shows that the prospects for the NHS after 2011 will be severe unless the service responds now by improving efficiency and reforming the way care is delivered.

‘Our analysis shows the NHS will probably have to operate under these much harsher financial conditions up to 2017 - yet at the same time more older people, more technology and higher expectations will create more demand for health care. We do have a window of opportunity - just under two years when budgets still look relatively generous and the service can prepare for the lean years ahead.

‘In practical terms that means every NHS organisation should be embarking on a rigorous programme of cost control, and every organisation should be working with others to redesign services to improve quality and save money. The two are not necessarily incompatible."

But, what is also required is political courage. "We do not need politicians boasting that they will spend more than the other lot when they all know perfectly well that no matter who is in power the next few years will be about managing with less.

"This is not the time for reassurance - it is a time for difficult messages and support for doctors, nurses and managers who are prepared to reshape services at local level.

‘That will mean driving efficiency throughout the system while focussing on the quality of care; concentrating some specialist services in fewer hospitals; moving other services into the community and learning to manage patients better to avoid unnecessary admissions and unnecessarily long stays in hospital.

The alternative is to shy away from this agenda, pretend it will all be fine, and risk throwing away the significant advances that have been made in recent years.’