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I would also like to place on record the importance we attach to our relationship with the Association. At this time of enormous change within the NHS it has never been more important to maintain an effective dialogue between us. Jenny's work on behalf of the Association ensures that these lines of communication are always open.

I am particularly pleased to be here tonight because it allows me to emphasise the importance of good management within the NHS and to challenge the myth that the only way to make the NHS better is to get rid of all the managers.

It is ludicrous to claim, as some have done, that the NHS would get better if we sacked the managers. It wouldn't.  The NHS needs the best managers in Britain. People who can combine leadership with sound clinical knowledge. 

Managers who can protect what is best about the way we currently deliver our services to patients but who can also see the need for change and can implement that change successfully.

Leaders who can not only manage budgets. But can manage people as well, because the most important asset the NHS has are the people who work for it. We are lucky we have these managers in the NHS today. Many of them are here in this room tonight.

And in this context, I think it is worth reflecting on how far the NHS has come in the last few years. For decades our national health service had neither the investment nor the capacity that it needed to provide the kind of health service that our country required.

Many of our hospitals and clinics were simply worn out. Most of them preceded the creation of the NHS itself. We had far too few doctors, nurses and other healthcare staff. Patients waited far too long to be seen and for their treatment to start. We performed poorly on many international healthcare indicators - cancer survival rates was one obvious example.

With additional investment and with reforms in the way we deliver our services you are beginning to turn this round. 

Last year for example, the NHS performed nearly a million more operations than it did 6 years ago. We saw nearly 2 million more outpatients. We can do this because we have 19000 more doctors, nearly 68000 more nurses and thousands more radiographers, physiotherapists and healthcare scientists.

As a direct result, waiting times are falling, not rising as some would suggest. Cancer survival rates are increasing and fewer people are dying from heart disease. Death rates for both cancer and heart disease are falling faster here in England than in any other country in Europe. It is not true to say that the extra investment isn't making a difference. It is.

And it is making a difference because of the excellence of our clinicians and because of the expertise of our managers.

And in this wider debate about the future of the NHS, I have a very simple starting point. I have always believed that strong public services are the best provider of opportunity that any society can have. Good schools can help raise the aspirations and ambitions of children.  A good police service and criminal justice system can help keep communities safe from harm. But first and foremost a good health service can help ensure that a patient's passport to personal health doesn't have to depend on a patient's personal wealth.

These are all decent values. Public sector values. And they all help to make Britain I believe a fair and decent society in which to live. They help promote social solidarity and social justice and are the enduring values of the NHS itself.

And they are rightly supported by the vast majority of our people, because the NHS has made an enormous contribution to the health of our society. It is one of the most efficiently managed health care systems in the world with much lower management costs than other European countries and private healthcare providers. Its focus on public health has been essential. Its primary care services, led by Britain's family doctors, are the envy of many other countries.

Those are its strengths. But we all know that the NHS has its weaknesses too. Its centralised, top down system has frequently acted as a brake on innovation. Our monolithic structures have resulted in patients receiving very little real choice over where as well as when they get their treatment. Our historic failure to utilise the full potential of IT has meant that we have not taken advantage of the amazing power of this new technology. And our methods of distributing resources through the system have never properly rewarded success or thrown the necessary spotlight on failure.

The focus of the NHS Plan was on addressing all these failures. It charted a new course for the NHS. Backed up by new investment it set a 10-year plan for both investment and reform - something the NHS had never previously enjoyed.

The purpose of these reforms is to help the NHS meet the needs of our modern society. Rising levels of both affluence and aspiration mean that people rightly expect modern public services to respond more effectively to their individual needs. All of us have more choice as consumers. We all enjoy the sense of being more in control. The challenge for the NHS and those who manage it is to mirror the changes that have taken place in our economy and in our country and reflect them in the way we deliver our own services to the public. And to do so in a way which does not compromise on any of our core and enduring values.

This means that care should continue to be free at the point if use. It means that equity and fair access should remain our mission at all times. So the greater choice we aim to provide to patients will be the same for everyone and not be dependent on a person's ability to pay. And it means that we will not drop our drive to raise the quality and safety of the care we provide to the public.

These are the new foundations on which we can build a stronger and better NHS.  And they are also the new challenges for medical managers. A national health service with more doctors, nurses and skilled professional staff than ever before. With more choice, greater capacity, newer hospitals, the latest equipment and drugs, and the best IT systems we can have. Providing treatment more quickly as well as providing better public health and health promotion services.

The extension of greater patient choice will not only help the NHS to provide a more personal service to its patients. It will also help us use our spare capacity more efficiently. And it will help advance the cause of equity and fairness and not undermine it. At present the choice facing far too many people is either to pay and go outside the NHS or to wait longer and stay inside the NHS.  That is simply not acceptable.  Ensuring greater choice is available to patients within the NHS is therefore a mechanism for ensuring greater fairness and equity and not, as some of our critics have suggested, a trojan horse for the introduction of unbridled market forces. 

Patients waiting more than 6 months for treatment are now being offered the choice of an alternative provider who can meet their requirements more quickly.  From the end of next year, choice at the point of referral will offer patients a much more extensive range of options.  Clearly more choice will require more capacity. And more capacity will in turn depend on more diversity. The new treatment centres are coming into operation - some in the independent sector and some in the NHS, and we're making better use of spare private sector capacity too. I think in all these areas we've come a very long way over the last couple of years.

But if all of this is going to work properly, there are three things we need to get right here. Firstly, we need to get the right incentives in place across the system as a whole. Not just in secondary care but in primary care too. The new financial flows will for the first time, provide encouragement to every hospital to do more work and to be properly rewarded. They will help underpin patient choice as well as promote efficient use of taxpayers' resources.

These reforms are being introduced gradually and over time so that by 2008 the system is fully operational. There will be no big bang as we want to avoid the risk of financial instability and the risk of sudden lurches. This year, the first wave of NHS Foundation Trusts is helping the rest of the NHS to prepare for PBR. Overall, 1% of hospital income will be earned by tariff this year. But next year this will rise to 60%.  And if we're going to make that transition, we need to get this right.

In coming to decisions on this, we intend to draw on international best practice and on the experience this year in NHS Foundation Trusts, but also on the views of this Association.  Work with us to make sure these reforms have the effect we all want them to have  - acting as a spur to innovation and enterprise in the NHS and in the process, meeting the needs of our patients to have access to the fastest possible treatment and care. Helping the NHS become the service that we all want it to be.

In primary care, the new contracts will also embrace the same principles of incentives and rewards. The new Quality and Outcomes Framework will properly reward GPs for improving the care and treatment of their patients - particularly those with long term chronic illnesses. In doing so, we are rightly moving beyond the old system of simply paying GPs for the number of patients on their lists.

Again our purpose in making these change is clear. We want these new rewards and incentives, backed up by the extra resources going into primary care, to help the NHS provide a better service to the 17.5 million patients in our country suffering from these long-term conditions. Easing the pressure on hospitals by reducing the rate of emergency admissions - helping us to meet our objective of reducing waiting times even further. Moving away from episodic care often provided in the wrong setting, to one where we properly manage long term conditions in the community. Getting a better balance between care provided in the community and care currently provided in hospitals.

PBR will therefore help to lay part of these new foundations of the NHS. A new system of rewards and incentives helping patients to have greater freedom to choose when and where they get treated. And to make choice work effectively, there has to be better IT right across the NHS. This is the second key ingredient. And here too medical managers have a major role to play.

Under the National Programme for IT all of the procurement contracts for the new generation of NHS IT systems have been successfully let on time and to budget. This has been something of a unique achievement. Our focus now, however, has to shift towards making the systems work and enabling staff to use them to deliver benefits for patients.

To make a success of this transition from procurement to implementation we need to share a common sense of direction and purpose. We need an effective dialogue between the centre and the front line. We need committed partners in industry. I think we have them. We need to engage every patient, doctor, nurse, medical secretary, manager and healthcare professional in understanding the function and capabilities of our new systems. And we need to start right now. In this context it is worth bearing in mind what Derek Wanless said in his report on the future of the NHS.

He said,

' How effective this investment in IT proves in delivering a higher quality, more responsive health service and in reducing costs will depend on the quality of implementation. In particular, it will depend on the extent to which the investment takes place in an integrated manner with consistent standards across the whole service.'

It is impossible to disagree with this analysis. And I accept the challenge it poses to all of us. And given the chequered history of major public sector IT programmes there will be many people who say the challenge will, ultimately, prove beyond us. I absolutely reject this view. I believe that we can and will rise to the enormous challenge that implementing the programme poses for us. But our success cannot depend solely on the individual commitment and motivation of NHS staff, which, as always, will never be in doubt. And neither can it be taken for granted.  It has to be based instead on a clear set of priorities - national as well as local - on training, preparation, roll out and ultimately delivery.

The huge investment we are making in IT will support this extension of patient choice. Electronic booking of hospital appointments from the GP surgery or through a booking call centre will be a reality in all parts of the NHS next year. There will be more information to compare hospital waiting times as well as treatment outcomes. Helping patients not just to make a choice, but to make an informed choice based on real time information.

And finally, we need to ensure that medical managers are seen as strategic leaders and key influencers in NHS organisations. They are central to shaping and improving patient services and taking forward change in the NHS.  The Association's document 'Making Sense - a career structure for Medical Management', launched in February has provided a comprehensive analysis of managerial roles and sets out a thorough framework for further development.

BAMM is now working with local NHS organisations to take this work forward. The measures raised in the report are the right measures to concentrate on.

And we too are working to support medical managers. The NHS Leadership Centre offers every medical director and every clinical director the opportunity to strengthen and build upon her or his leadership skills and capabilities by taking part in one of its excellent development programmes. Over 50% of all medical directors have chosen to take up this option since April 2001.

In a world where it is knowledge that adds wealth to the economy, other industries have long since discovered that successful organisations need to develop the skills and talents of all their staff. I think the NHS has been slow to respond. The work that BAMM does here, together with the involvement of the wider NHS is beginning to put this right.

Finally, I want to leave you with one observation. When you look at all we're doing at the moment: expanding capacity, recruiting and training thousands more qualified staff, reforming the financial system, introducing new employment contracts for over a million people, developing new models of choice, the biggest IT programme on the planet, building 100 new hospitals - what other organisation in the world today can say that it is managing such a far reaching programme of reform? What other organisation in the world can say that it has the managers that are capable of delivering such an agenda? I don't believe there is any other such organisation apart from the NHS.

So I think you are entitled to enjoy your annual conference this week. It's been my privilege to speak to you this evening. Thank you.