Plans to cut London's non-emergency ambulance budget by 12 per cent have been rejected in favour of income generation proposals, but the LAS will still shift resources from routine to emergency services. Options include raising more from the sale of old vehicles, normally sold cheaply at auction, and charging more for attending football matches.

The number of bids for trust status in the first wave is falling, with at least 14 contenders having dropped out since health minister Virginia Bottomley revealed the latest total as 83 last month.Local campaigners are greeting the withdrawals as victories.

Regional health authorities are considering pressing the Department of Health for a£110m contingency fund safety net when the internal market reforms are introduced.

Health secretary Kenneth Clarke is understood to have already demanded an extra£3bn for health spending in the current public expenditure negotiations.

HAs pressed hospitals to sacrifice quality in order to stay within budget in a simulation of the internal market dubbed the 'Rubber Windmill', HSJ can reveal.During the simulation, the market effectively 'crashed' in its third year, with hospitals reduced to emergencies only and community services swamped by early discharges.

Local authorities have told the government they will need an extra£1.6bn a year to meet the cost of residential care once the community care reforms are launched.They also want another£90m a year to meet a 'shortfall' between the cost of residential care and that met by social security payments.

Leading Conservative members of the Commons social services committee are threatening to vote against the government if, as expected, it opposes an amendment to the NHS Bill which would ring-fence community care funds within the revenue-support grant.