The health service is to get a three-year financial settlement which will 'offer sustainable year-on-year increases for the foreseeable future', prime minister Tony Blair promised last week's NHS management conference.

But he failed to put a figure on the settlement ahead of next week's comprehensive spending review announcement, winning polite applause rather than a repeat of the standing ovation he got at the same event two years ago.

Addressing up to 3,000 people at the Institute of Health Services Management and NHS Confederation event, Mr Blair said: 'I think you will see we have kept our side of the bargain.'

He announced a challenge fund of money 'linked to results' and a plan to designate top performing hospitals and GP practices 'beacons of excellence' (see box).

And, acknowledging that the NHS was underfunded despite receiving extra money since the government took office, he added: 'I know it is not enough.'

Mr Blair said: 'You will see that the NHS will get the resources it needs. I give you that commitment.' The last thing it needed was 'bursts of spending followed by drought', he added to applause.

'I want an NHS with the confidence that its funding will allow it to plan ahead, to be creative - develop services in the knowledge that they will be there not just today but in the years ahead.'

A modernisation fund would be ringfenced for IT, cutting waiting lists, refurbishing hospitals, new GP premises, new equipment, health promotion and training.

Allocations would depend on 'plans and proven mechanisms for using it', Mr Blair announced. 'It is investment for reform.'

Later, NHS Confederation chief executive Stephen Thornton told the closing session of the conference that Mr Blair's 'visionary speech' had put the NHS on a firm financial footing. But he added that politicians and the NHS had to 'come to terms with the fact that regardless of the amount of money, we will not meet the demands placed on us unless clear limits to care and treatment are set'.

Chairs and chief executives from health authorities and trusts welcomed the speech. Warwickshire HA chief executive Mike Marchment described it as a 'lifetime experience'.

County Durham HA chief executive Ken Jarrold added: 'You would think we were spending on hospital improvements already, but a lot of places are not. This is a way of making sure it is done.'

And Wigan and Leigh trust chair Andrew Foster said: 'This is not just about papering over the cracks.'

Reactions to Blair's speech: see Conference Focus, page 7.