The setting: A hospital boardroom. A meeting of the executive team of an NHS trust is about to take place.

Hugh (the chief executive): Thank you all for arriving promptly. You'll recall we set aside the whole of this executive team meeting for agreeing next year's efficiency savings. But before we get down to business, let me introduce our new financial management trainee, Verity, who is here today as an observer. Verity, we try to encourage proactive management so if at any point you want to contribute anything, go right ahead.

Now then, to the matter in hand: Rob, can you remind us how much we're looking for this year?

Rob (finance director): Well, the going rate from the department for 2008-09 and the two following years is 3 per cent a year. But I think...

Hugh: Three per cent, then. Ok, what proposals have we got?

[Executive team members caress their Blackberries and avoid eye contact with one another].

Rob: Hugh, what I was going to say was, we really need to plan for a surplus if we are going to impress the Monitor this year [Medical director Lance chuckles at the phrase "the Monitor"]. Besides, as it's already April there's bound to be slippage. So why don't we go for, say, 4 per cent?

Hugh: I see what you mean but 4 per cent does seem a bit ambitious. Won't you be able to do clever tricks with depreciation or land values or something to keep the target manageable? Could we raid the revaluation reserve?

Verity: Mr Trousers, have you seen the recent survey by the Healthcare Financial Management Association of how trusts are achieving their savings? Basically it analyses ideas for savings into three main categories: pay, non-pay and efficiency. We could use it as a kind of a checklist.

Rob: Sounds promising, Verity. Let's have a look at the sort of things they list under pay. [Reading the survey]. Hmm, freeze vacancies. That's original. Director-level approval for the use of agency staff. Elimination of unfunded posts. Oh, and a panel to review all posts before advertising. Well, it's fine if you're into turnaround, but...

Patience (director of operations): The turnaround team recommended a lot of that stuff the year before last. Those consultants from the accountancy firm, remember? We were forever signing pieces of paper.

Hiram (HR director): And we don't buy advertising space any more. That budget went last April.

Hugh: Isn't there anything else? Three-quarters of our total spend goes on pay.

Rob: The only other pay idea is benchmarking Agenda for Change bandings with similar organisations.

Hugh: Let's have a look at non-pay, then. Rob, what do the HFMA suggest?

Rob: Three main areas, boss. Supplies savings through procurement hubs and standardising usage. Review service level agreements. And they're talking about estates, human resources and payroll and asking if bought-in services give us value for money...

Patience: Well, if you ask me, that estates management service is...

Hugh: Sorry, that's part of the PFI contract, we can't touch that. Rob, what was the third area?

Rob: Drugs. They're saying we might want to think about putting pharmacists on the wards. They often produce net savings.

Hugh: Can I say something? Who was it who said: "When I hear the words spend to save, I reach for my machine gun?" Goering, wasn't it? The point is, if we're really going to hit 3 per cent this year...

Rob: Four per cent.

Hugh: ...we need actual cash-releasing schemes, not pie in the sky. Lance, what do you think about that procurement proposal?

Lance [looking up from notepad]: Sorry?

Hugh: We could standardise on medical devices and prostheses. Negotiate a discount for bulk on all the artificial hips and knees we buy. It would save thousands.

Lance: It'd save us more than that, Hugh. We'd lose the goodwill of our orthopods overnight. The theatres would be half empty before you could say...

Hugh: Well, we're doing great so far, lads. Nothing new on pay, nothing feasible on non-pay. Before we revert to doing it the old way and just get management accounts to allocate it pro rata, what about efficiency? Surely the answer must lie in whole-systems working and lean thinking.

Rob: Yes. There's reducing the number of beds to start with, plus reducing length of stay, improving discharge, increasing day-case rates and flexing for seasonal variations. Then there's improved theatre use.

Lance: We're doing all that already. Partly to hit the 18-week target, of course. But listen, we're sick of being modernised. We're sick of being told by the PCT we should modernise.

Hugh: Rob, what else have they got?

Rob: There's reviewing the management structure...

All [in chorus]: NO.

Rob: ...there's centralisation of functions like waiting list management and human resources...

Hiram: But we've only just devolved HR to clinical directorates.

Rob: ...and finally there's reviewing reserves and revaluation of the estate.

Hugh: Ah. I knew there'd be something useful in there. Verity, tell us more.

Verity: Well, the HFMA says there can be a tendency to be over-prudent in keeping reserves. And also under the new international financial reporting standards, we can expect asset values to fall, with a consequent reduction in capital charges.

Rob: That's not until 2009-10 though.

Hugh: So essentially it's a bridging issue, then. Makes sense. There had to be a positive side to Northern Rock and falling house prices and all that. Well, it looks like we can get through 2008-09 by managing our reserve levels and, well, Rob, could you and your team work through the details, please? Shall we break there? Verity, thank you so much. How long did you say your placement here lasts? [Fade out]