Andrew Lansley has become the Secretary of State for Health in the new Conservative-Liberal Democrat government, after seven years shadowing the job.

In his first interview, Lansley confirmed that the NHS would receive ‘real terms’ increases in funding, in line with the Conservative Party’s manifesto.

He also clarified that this would mean increases in line with general inflation and confirmed that he realised this would leave the health service needing to curb ‘medical inflation’ and to find savings to cope with growing demand.

NHS chief executive Sir David Nicholson has warned that the demand caused by an ageing population living with a higher burden of chronic disease and other pressures could amount to £20 billion over the next four years.

"If we protect the real value relative to the level of inflation in the economy as a whole, it will not protect the NHS from the need to secure efficiency savings and to control pay and prices,” Lansley told Radio 4’s Today programme.

“It may well be true that in the past there has been a substantial increase in pay and prices in the NHS relative to the rest of the economy. That is not sustainable for the future.

“We [must] deliver efficiency savings in the NHS in the same way as the rest of the public sector. If we can secure those efficiency savings, we can reinvest them to deliver improving outcomes for the public."

Both the Conservative and the Liberal Democrat manifestos set out proposals for a major shake-up of the health service.

The Conservatives promised a Department of Public Health, an independent board to run the health service day to day, and changes to commissioning with a bigger role for GPs. The Liberal Democrats called for elected boards to run local health services.

However, policy experts predicted that these plans were unlikely to progress quickly, given the pressing need for the new government to get to grips with the economic crisis.

Anna Dixon from the King’s Fund said: “Decisions and compromises on how quickly and how hard to cut public spending will have much more immediate and significant implications for the NHS.”

Professor Paul Corrigan, former health advisor to Tony Blair, said the NHS should be careful not to complain too loudly.

Speaking at the CHKS Annual Awards last night, Corrigan said: “We know in the NHS that we will get real terms increases for the next five years, but it will be just 1%.

“That is a far better position than the police, army and pensioners who will all face real term cuts. If you keep going round saying this is going to be ‘really tough’ that will not be a good bit of politics.”

Corrigan also argued that the policy differences between the new coalition members on the health service were as nothing compared to their differences on Europe, Trident and banks.

And he pointed out that exposing and getting far better performance information to the public, allied to greater competition, featured heavily in both health agendas.

“There will be a great deal more information being made available and actively used,” he said. “The kind of service currently provided by NHS Choices is going to look very crude within the next few years.”

Corrigan also predicted that the new government would let the logic of the market and choice work. “We will see better hospitals get a great deal better as they gather more patients, data on what they are doing and improve.”

The flip side was that poorer performing hospitals would fall behind and “there will have to be mechanisms for them to be taken over.”

Although the new Cabinet met for the first time this morning, junior ministerial posts have yet to be announced.

This means there is no news on who may get the NHS IT brief, or on what is likely to happen to the National Programme for IT in the NHS. However, the new government has confirmed its commitment to scrapping major IT databases, including ID Cards and ConctactPoint.