We all know that the financial situation facing the NHS is the greatest challenge the health service has faced. Courage and public support are vital if the NHS is to survive, says Mike Farrar.

Looking three years ahead, I see three potential scenarios: the NHS might be in financial balance but service standards will have slipped; service standards might have been maintained but the system will be in major financial deficit; or the NHS might have maintained standards and be living within financial resources.

Worryingly, the early indications suggest the first two scenarios are emerging. If we are to avoid these becoming the dominant outcome, radical action is necessary.

That will involve tough but necessary decisions on reducing beds and posts, as well as reaching a pragmatic agreement with staff groups on pay, job security and redeployment. Yet without public understanding of the scale of the challenge, there will be no mandate for the action necessary.

The ability to establish this honest dialogue with the public is directly affected by the nature of the political discourse that surrounds us. I am not naive enough to believe that this will cease completely. But no one benefits from pretending the NHS can meet the current financial challenges by managing small, peripheral aspects of the cost base.

Of course, every penny counts. It is refreshing to hear the government acknowledgement that private finance initiative costs will have to be funded and that they create additional pressures on some hard pressed health economies.

But in isolation these costs contribute around £1.5bn towards the £20bn of efficiencies we need to find. Indeed the real problem with PFI is that it was designed for a different NHS from the one we have to deliver and constrains some of the options for change on which we need to engage the public.

And we need this debate with the public to start now. NHS organisations report signs of pressure are building in the system.

A recent NHS Confederation study showed that almost 90 per cent of people running the NHS believe the current financial situation is either very serious or the worst they have experienced.

Government figures already show waiting times struggling to stay within their constitutionally mandated limits. And Monitor reports that foundation trusts are slipping backwards on financial compliance.

Take the lead

If we do not act now to make the public aware of the scale of the challenges, these pressures will only grow. Patients will suffer as control of waiting times is lost and the NHS is forced to salami slice its way out of financial trouble.

As NHS leaders, we now have no choice but to take the lead. The operating framework next year is almost certain to present the NHS with an extremely difficult set of challenges.

As a group, we have unwittingly allowed the important function of organising care, managing change and accounting for priority setting to be described as “unnecessary bureaucracy”. We support the advent of clinical commissioning but I can see why some in general practice see this is as an exercise in passing the NHS financial bomb.

So how should we respond? We need to take the tough decisions necessary, stand shoulder to shoulder with clinicians where the case for change is clear, and enter difficult conversations with staff about pay, job security and redeployment.

This means stepping back up to the plate and demonstrating the value of high quality management in delivering high quality care.

We have to take back ownership of the quality, innovation, productivity and prevention programme, explaining simply what this will mean for people. We need to engage them in a debate about how their NHS services are going to be delivered and where.

The key message is that more efficient care can mean better care for patients. It is possible to make changes to services while maintaining or even improving the quality of care for patients. And to deal with the future demand for care, we need to convert these changes into cash, which means reducing capacity.

In return for this public understanding, we can and must do better in a number of key areas. These include reducing variations in quality, improving our procurement, introducing cost-saving technologies faster through supply chain management; and reaching agreement with our staff on jobs and pay, despite a difficult industrial relations climate.

Critically, we also need help from the government. The recent announcement over PFI is welcome in the sense that ministers recognise there are financial pressures in the system. They should also be congratulated for making the right call over Chase Farm in north London.

But this is one of a number of plans for service change that are coming down the track. So Chase Farm must become a watershed moment. Neither national nor local government should lose their nerve where the case for local change is made.

No one said that this would be easy, and no bit of the system can do this on its own. Meeting the financial challenge needs action at every level – local, regional and national.

But we have already lost time and the big decisions and reorganisation of care are overdue. Honesty and courage now are vital if we are to get anywhere near catching up.