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"The Nicholson Challenge is the key issue facing the health and care system. The fact that there is another bill going through Parliament changing the management structure of the NHS means that there is a tendency for every comment about the NHS to be framed by the debate about the bill.

But the NHS is well used to management change. In reality the key pressures which are building in the system arise from the fact that demand is continuing to grow at a time when health and social care budgets have stopped growing.

This development has been well signposted. The implications were first highlighted by Sir David Nicholson in May 2009, and endorsed by both the previous government and the Coalition.

This report is a review of progress within the health and care system towards meeting that challenge.

The NHS funding challenge can only be met by rethinking and redesigning the way health services are delivered now, in order to deliver lasting long term benefits.

Our December 2010 Report on health expenditure expressed concerns then about the ability of the health service and local authorities to make the demanding efficiency gains required of them by the 2010 Spending Review, while maintaining quality of car

e.  Both the NHS and local authorities are struggling to meet current targets in a sustainable, long-term manner that will maintain high quality, efficient care in the future.

The need to provide high-quality and efficient services that meet local needs within the funding available must be addressed as a matter of urgency. This requirement underlies the importance of developing new structures which deliver genuinely integrated services."

• Report: Public Expenditure
• Inquiry: Public expenditure