What are the real challenges of NHS finances?

What are the real challenges of NHS finances? The NHS may not be here in 10 years' time unless it undergoes rapid and radical reform.

Over the last year, there have been a quarter of a million more A&E attendances to deal with, translating into a total of five million emergency admissions. Nine million 999 calls have been answered; and an estimated 150million different patient interactions delivered by community services.

Over a million people with severe or enduring problems have accessed secondary mental health services. Seventy thousand people have been treated at home by crisis mental health teams rather than being admitted.

This has all been delivered on top of a 4% efficiency requirement and through the largest reorganisation in the NHS's history. Complacency is the enemy of improvement, but NHS staff at all levels should take great pride in these achievements.

Colleagues throughout the service know that more challenges lie ahead. A key challenge is financial: we face an unprecedented ten to 15 years of flat cash or less while demand increases by 4% or more.

This means that the debate now has to change. We can't go on pretending that all providers can realise 4% recurrent efficiency savings year on year till 2021 without rapid radical reform. Not when that's twice the long run average for the UK economy as a whole and four times what the NHS has traditionally achieved.

Nor can we go on pretending that community and mental health providers can continue to absorb increased volumes on declining block contracts without an impact on service delivery. Nor that A&E departments can treat skyrocketing admissions while only being paid 30% of the cost of treating many of those patients.

We also can't go on pretending that we can improve patient / staff ratios; move to seven day services; and deliver the new integrated care pathways that our patients need, without finding significant extra investment. And we also shouldn't pretend that the acute sector can somehow magic a further 2-3% saving on top of all this in 2015-16, to offset the £1.9bn that will be needed to create the new integrated transformation fund.

The NHS has to stick within its financial envelope. But we need an open and honest, rigorous and evidence-based, debate about what really is possible. We need clarity on what reforms are required to meet this size of challenge and how quickly they can be delivered, particularly because we're three years late starting this debate.

We need to be clear with ourselves, and with the public, on what the impact of this unprecedented financial squeeze will be. We also need to ask whether we, as a nation, having invested to transform the NHS over the last 15 years want to see it slip slowly and inexorably back towards its previous state.

The unprecedented NHS financial squeeze creates a compelling and overwhelming case for change. It's difficult to see how the NHS can emerge intact and effective in 10 years' time unless we embark on a programme of rapid, radical reform.

One thing is clear – the change should look different in each area of the country because each local health and social care economy is different. Different communities, different needs, different solutions required. It's also clear that change of this type can only be driven locally from the bottom up, not centrally from the top down.

Rapid, radical reform requires a step change in how we do business. All the relevant leaders in each local health and social care economy need to come together to form a single, integrated, strategic leadership team. They need to quickly agree a single, sustainable, long-term plan. The needs of local communities and the wider local health and social care system need to be prioritised over the needs of individual institutions. That team, working with local clinicians, needs to make an effective and compelling public case for the radical service changes that will be needed in most places.

The next five years will probably be the most difficult in the history of the NHS. But I am confident that if local NHS leadership teams can meet their leadership challenge, and if the centre can provide the help and support those teams need, then we will emerge strengthened and renewed. And with a new model of NHS provision that safeguards the future of one of the crown jewels of our national life.

This is an edited version of a speech made by Chris Hopson at the Foundation Trust Network's annual conference Guardian Professional