NHS chief executive David Nicholson has told managers it is 'perfectly possible' to improve services despite the government's plans to cut £5bn from planned public spending.
Speaking at the Managers in Partnership annual conference in central London, Mr Nicholson reassured delegates that growth in 2009-10 should remain broadly similar to this year's levels.
But he warned the following year "looks much more difficult" and urged managers not to attempt to hide money away.
His speech came two days after chancellor Alistair Darling's pre-Budget report proposed to cut£5bn from planned public spending, of which up to£2.5bn is likely to come from the NHS.
Mr Nicholson said: "It looks like relatively low levels of growth for the next two to three years. We need [to] neither go into a complete spending spree or try to ferret away millions of pounds under the carpet.
"We need to focus investment in the areas that will better improve services and reduce costs. It's perfectly possible."
Efforts in previous years to balance budgets had stood the health service in good stead during an economic downturn, he said.
He said managers should be addressing variations in care, such as differing waiting times, in order to ensure the long term sustainability of the health service.
Further details of how the cuts will affect trusts will be in the operating framework, expected next week.
HSJ's Delivering NHS Quality Improvement conference is on 31 March. For early details, email email@example.com