Local government must have a stronger voice in service redesign and commissioning decisions to ensure the public's concerns are heard by the NHS, according to Audit Commission chair Sir Michael Lyons.
'Local government should be given new responsibilities to work more closely with primary care trusts,' he told the NHS Confederation conference.
'I support the idea of a convening role, encouraging local choice and strengthening the voice of local neighbourhoods and communities in both service design and resource allocation.'
He called for the creation of 'what we might call primary health partnerships', based on local government adopting a more open approach to partnership working and stronger leadership.
And he said that work by the commission on developing local government's comprehensive performance assessment system would play an important role.
'Our current thinking on how CPA might operate after 2008 is that the emphasis in future should be placed on examining with our partners how all public services in an area are contributing to broad outcomes such as health, community safety, learning, environment and economic prosperity.
'PCT assessment could in the future be tied more closely to that of the local authority and other services that contribute to local health outcomes.'
The NHS's adoption of market-based systems would mean it would have to ready itself for 'waves of extinction sweeping through public services in order to get the kind of innovation that markets produce,' Sir Michael warned.
He told delegates that a system that remained 'collectively funded and publicly controlled' would not tolerate such a pattern.
The challenge, he said, was 'to fail better'.
'Dealt with openly, recognising that some level of failure is inevitable, failure can galvanise improvement.'
He warned that if public trust was lost as a result of deficits, the results could be felt for a long time.
'Local government still feels the constraints of financial regulation introduced in the '80s by a government intent on reigning in a small number of high-taxing councils. It is vital to get your financial house in order, otherwise public distrust and central regulation will grow around you.'
We must do better, vows Audit man McKeon.
Local government and the NHS should have joint assessment targets on health inequalities, said Audit Commission head of health Andy McKeon.
He admitted that the Audit Commission, in partnership with the Healthcare Commission, 'needs to do better'.
'We have to have a proper joint assessment with the health service and local government with us and the Healthcare Commission rather than doing it at different times'.
'There are some public health targets in local authorities' comprehensive performance assessments, but we could do more with the local strategic partnerships coming along to drive the strategy agenda.'
Faculty of Public Health president Professor Rod Griffiths said such a 'partnership agenda' would be 'invaluable' to try reduce the health inequalities gap.