Nurses, doctors and consultants will be offered bonuses for increasing the number of patients they treat, under sweeping reforms to the NHS outlined by the Prime Minister.

Tony Blair set five challenges to NHS staff to raise their standards of performance and end the "postcode lottery" of care in return for the £15bn extra pledged to the health service in Tuesday's Budget.

Promising extra money in return for modernisation, the Prime Minister told NHS staff he had answered their call for more resources. "We rose to your challenge. Now rise to ours," said Mr Blair. It would, he said, take "tough, often painful decisions about change to make progress [but] I want all parts of the NHS to sign up to the plan." Consultants will be paid more for devoting more time to treating NHS patients and officials said last night that entire health teams - doctors, nurses and consultants - could receive bonuses and hospitals could get better equipment for improved performance. "Nothing is off the table," said a Whitehall source.

Hit squads of managers will be sent in to run hospitals which are failing to deliver the higher standards demanded by the Government. The NHS plan copies the drive to raise education standards by sending hit squads into failing schools.

Next week Alan Milburn, the Secretary of State for Health, will allocate £660m of the extra £2bn that the Chancellor has made available for the NHS from April. Mr Milburn warned he would withhold some of the money for hospitals that were failing to deliver. They would have "more support and, if necessary, intervention", Mr Milburn said.

William Hague said the Prime Minister "has a nerve to make a statement about professional failures when it is about ministerial failures".

The Commons statement was intended to show Mr Blair's determination to get to grips with the Government's failure to meet the expectations of patients for improvements in the health service. He will take personal charge of the delivery of the improvements by chairing a Cabinet committee on the health service, making himresponsible for any failures, such as further increases in hospital waiting lists.

It will also open Mr Blair to the charge that he is admitting the Government's failure to meet its pledges to make the NHS better at the last election, in spite of the sums already poured into the health service.

Downing Street has become increasingly alarmed at the damage that failure to improve the NHS is doing to the Government's support in the Labour heartlands. It is now, in effect, taking control of the delivery of health service improvements from the Department of Health.

The new Cabinet committee will publish in July a detailed four-year action plan for the NHS, a move that was ridiculed by Mr Hague as a "timetable for a timetable". Mr Milburn said yesterday he had no intention of "pouring good money after bad" by insisting on higher performance for more investment. However, sources ruled out the threat that failing hospitals will be closed.

Senior health professionals gave the plans a cautious welcome when they were briefed at Downing Street on Tuesday night, but health staff may feel aggrieved if they are seen to be taking the blame for the structural under-funding of the NHS over many years.

Mr Milburn today will outline his plans for bringing all health professionals into the consultations on the reforms.

There were signs last night that the policy was being decided "on the hoof", after one senior Downing Street source appeared to signal that teams of managers from private hospitals could be brought in to run failing NHS hospitals. That was later ruled out by Downing Street, which said only managers from successful NHS hospitals would be brought in.

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