Prime Minister Tony Blair said the NHS was facing "challenging times" today as he held a summit to discuss the financial crisis in the health service.

But Mr Blair insisted that reforms would bring improvements.

He was speaking against a backdrop of continuing job cuts across the NHS as trusts struggle to cope with serious financial deficits.

Mr Blair said: "The hard thing is that when change is happening there's enormous resistance but sometimes what's important is to hold your own and have confidence that the change will deliver a better service."

The Prime Minister and Health Secretary Patricia Hewitt called the meeting at Downing Street with senior managers from primary care trusts and health authorities from around England.

NHS job losses announced in recent weeks have topped 7,000.

The total NHS deficit for this year is expected to be £623 million.

Mr Blair was speaking as Health Secretary Patricia Hewitt announced a reorganisation of Strategic Health Authorities in England.

The move will see the number of SHAs cut from 28 to 10.

Ms Hewitt said that taken alongside the planned reorganisation of primary care trusts, details of which will be announced shortly, the changes would boost services.

Ms Hewitt said: "These improvements to the local NHS will mean more money for frontline services and better care for patients."

Chief executives of primary care trusts and health authorities were invited to today's summit to discuss how to bring the NHS back into financial balance.

The meeting was held a day after the West Hertfordshire Hospitals NHS Trust became the latest to announce jobs cuts with up to 500 posts being shed to tackle its £28.6 million deficit.

Around 7,000 job losses have been announced in recent weeks as trusts battle financial difficulties.

The Government has said that many plan to shed jobs through "natural wastage" such as not replacing temporary or agency staff, freezing non-essential vacant posts and redeploying staff to other roles.

But a report out today suggests that NHS reforms could lead to a further 100,000 job losses.

The report, published by the think tank Reform, said Government changes would bring about a more "efficient" workforce - but with at least a 10% reduction in staff.

Its author, Nick Bosanquet, Professor of Health Policy at Imperial College London, said reforms such as foundation hospitals, payment by results and patient choice would lead to a greater emphasis on productivity.

He believes that experienced "high quality" staff contribute "far more" to patient care than larger numbers of inexperienced staff.

Despite this, the NHS to date has focused on "quantity rather than quality", with thousands more workers brought into the system, he argued.

The report, Staffing and Human Resources in the NHS - Facing up to the Reform Agenda, added: "It is likely that productivity gains will mean that staff numbers are reduced by at least 10%.

"This reduction should occur across all generic staff, skilled and unskilled. This change will make it possible to improve quality, with more investment in fewer people.

"The truth that experience and quality counts for more than quantity applies across medical manpower.

"Simply put, a manager will benefit more from 10 experienced staff than 20 inexperienced staff."

Ms Hewitt has rejected the assumption that staff would be cut by 10%

"Claims that a reformed NHS will mean shedding more than 100,000 jobs are nonsense," she added.

"Over the last few years we have been recruiting more staff to plug gaps in capacity and address shortages.

"Our focus is now on strengthening the workforce by asking staff to work more efficiently and flexibly to make best use of their dedication and expertise.

"As our reform programme beds down, some parts of the NHS will be probably reduce staff but other areas, for example in primary care, will probably expand as more services are delivered closer to the patient and outside hospitals."

But shadow health secretary Andrew Lansley said billions of pounds had been pumped into the NHS "without a corresponding increase in productivity".

Under the reorganisation there will be 10 authorities made up of the North East, North West, Yorkshire and the Humber, East Midlands, West Midlands, East of England, London, South East Coast, South Central and South West.

Ms Hewitt said the changes would result in a more streamlined form of management and administration, as well as cutting out unnecessary bureaucracy.

The meeting was attended by 16 senior managers from Trusts around the country,

including some who have recently announced job cuts such as the Surrey and Sussex Healthcare Trust and the North Staffordshire NHS Trust.

Mr Blair told the group that one of the "great paradoxes" whenever people talked about the NHS was that individuals tended to have a "positive" experience of the NHS but the overall impression of the service was "very negative".

He added: "I think there's a reason why people's actual experience of the NHS Trust is overwhelmingly positive. It's because there's immensely strong delivery going on in the NHS even though it's going through a challenging time.

"There's very strong delivery going on and I think that's the context to put the issues to do with the financial deficit and issues to do with so-called staff redundancies."

He said there were about 300,000 extra staff compared to a decade ago.

"However there's a big challenge for the NHS because, despite falling waiting times and waiting lists ... despite all of that there's a real challenge for certain Trusts and the system as a whole as we introduced a re-engineering of the whole service.

"The important thing for the moment is that we have confidence that out of the problems of change will emerge a stronger, better NHS.

"This is time not to step back from the changes we have made but to push on with them because they do offer us the best chance of getting the NHS we want to see."

Mr Blair and Ms Hewitt were joined by acting NHS chief executive Sir Ian Carruthers, who said there was "no room for complacency" in tackling problems in the service.

He said the plan was that by the end of the year 2006/7, the NHS would be in net balance.

There was a focus on reducing deficits through the process of introducing "turnaround teams" to help the worst affected Trust and continued improvement of patient care.

Antony Sumara, chief executive of the University Hospital of North Staffordshire NHS Trust, which announced recent job losses, said the Trust had been the "first domino" for the media when talking about job cuts.

He said staff had felt "very angry" and "bereaved" by the position of the Trust but now felt "part of the solution".

He added: "I think the staff feel quite let down by leadership and I think it's important you tell them it's not their fault."

Dr Duncan Newton, medical director of the Bradford Teaching Hospitals NHS Foundation Trust said there were several measures going on to cut patient bed days.

He added that there was a process to get "everybody possible walking to theatre" adding that it was remarkable "how much you save on portering and the like".

David Nicholson, from West Midlands Strategic Health Authority, said the reforms were biting and were working.

He added: "That is part of the pain of going through the change."

The new strategic health authorities will arise from reorganising 28 authorities.

Northumberland, Tyne & Wear and Co Durham and Tees Valley will join together to become the North East Strategic Health Authority.

Cumbria and Lancashire, Cheshire and Merseyside, and Greater Manchester will become the North West, while North and East Yorkshire and Northern Lincolnshire, West Yorkshire and South Yorkshire will become Yorkshire and the Humber.

Trent, and Leicestershire, Northamptonshire and Rutland will become the East Midlands.

The three authorities of Birmingham and the Black Country, Shropshire and Staffordshire and West Midlands South will become West Midlands.

Norfolk, Suffolk and Cambridgeshire, Essex, and Bedfordshire and Hertfordshire will become the East of England.

The North Central, North East, North West, South East and South West London authorities will become London.

Surrey and Sussex, and Kent and Medway will become the South East Coast authority while Thames Valley and Hampshire and Isle of Wight will become South Central.

The final SHA for the South West will be made up of Avon, Gloucestershire and Wiltshire, Dorset and Somerset and the South West Peninsular Health Authorities.