NHS managers must 'up their game' to earn autonomy and win the respect of their communities, the NHS chief executive has warned.

Speaking at the Healthcare Financial Management Association annual conference last week, David Nicholson told trusts not to 'fritter away' the record£1.8bn projected surplus. He described the underspend as a 'fantastic opportunity' but he admitted not all of it was achieved by design.

'We now have the potential for making real change which is under our control. We have to do that properly and you have to be able to plan and forecast in the best possible way.

'Often things have been done in a fairly rudimentary way, but we absolutely have to up our game, because what wins us autonomy from our communities and politicians is competence: saying what we're going to do and then doing it.'

His comments came after David Flory, director general of NHS finance, performance and operations, warned senior managers to think carefully about the damage that local scandals could do to trusts' reputations.

Weaknesses in boards' ability to react to early warning signs had been exposed during the 'major failure and horror of Maidstone and Tunbridge Wells', Mr Flory said. That failure severely damaged public confidence.

Disputes over money involving NHS organisations also damaged the NHS's reputation, he said. 'We look as if we don't know what we're doing,' he said.

'We need to think about the damage that is done when we get into those sort of situations. It's not just about the money, it's about the damage to the wider reputation.'

Mr Nicholson said a major focus for the Department of Health over the coming months would be to address the lack of competition for the most senior leadership posts within the NHS. The average number of suitable applicants for a chief executive's job was 1.2, he said.

'At the top of the system, where we should have competition for the very best people, for really important and significant jobs, we've got virtually no competition at all. That's a system that is not delivering. That's not because our people aren't up to it; we've simply got the whole system wrong.'