Chancellor George Osborne has announced that £3 billion will be spent on jointly commissioned health and social care services in what he described as an “historic” shift towards integrated care.

Delivering his spending review in the House of Commons, Osborne said the move would end the “scandal” of older people being “dropped off” at A&E on Friday night, and then left in hospital beds because there were no social care services available for them.

He also claimed the move would save the NHS £1 billion.

In a press release, health secretary Jeremy Hunt said: "We’ve agreed extra money to meet growing pressures, but with conditions to ensure the money is spent where it is needed the most.

"This settlement will help to make sure that we get maximum value out of every pound spent." However, if the up-front cash is to come out of the NHS’ "protected" budget, it is likely to add to pressures on the service in the short term.

The NHS is one of the few government departments to be protected from the Chancellor’s austerity drive.

But it still needs to meet the ‘Nicholson challenge’ to find £20 billion of efficiency savings to bridge the gap between flat funding and rising costs and demand that will otherwise open up by 2015.

In briefing ahead of today’s spending review, the Nuffield Trust pointed out that although the NHS is on course to meet the challenge, it has so far focused on the “easiest” changes – such as holding down wages and finding ways to shed administrative staff.

These will be harder to sustain in the future, although Osborne said today that public sector pay would not increase by more than 1% a year on average.

Increments for long-service will also be phased out across the public sector, except for people working in the armed forces, to the fury of unions.

Dave Prentis, general secretary of Unison, claimed the "onslaught" on pay would depress demand throughout the economy and lead to "critical shortages" of staff in nursing and social services.

To meet the Nicholson challenge in the longer term, though, the NHS will need to find unprecedented increases in productivity or to make more fundamental changes to the way it delivers services.

Nuffield Trust chief economist Anita Charlesworth said: "To date the NHS has delivered its efficiency targets largely through strong central measures such as cutting administrative costs and holding down pay. These are short term fixes.

"The pace of change needs to increase, with a greater focus on longer term transformation. Without such as shift we are storing up financial risk and NHS managers will find it harder and harder to match rising demand to a stagnant budget.”

Integrated care is one change being promoted. However, the government has been forced to move in this direction by the ongoing squeeze on council budgets.

Local authorities have cut spending on social care by around £2.7 billion – or 20% – since 2010, pushing up the “eligibility threshold” at which older people and adults get any help at all, and increasing the means-tested payments demanded for it.

The last spending review ordered £1 billion of NHS money to be spent on social care for patients who would otherwise receive hospital care, and today’s move accelerates the trend.

In a statement Dr Mark Porter, chair of the BMA Council, pointed out that it did so as the government is cutting council funding and holding down council tax.

"We hope the allocated funding is used to genuinely meet the needs of patients and help alleviate the current pressures on emergency budgets," he said.

"However, we are concerned that the Chancellor’s decision to cut the local government budget by 10% will seriously impact on social care and wider public health needs."

Overall, Osborne claimed that his policies are “moving Britain from recession to recovery” while making sure that Britain could “live within its limits.”

He told the Commons that total government spending in 2015-16 will be £745 billion, with health taking £110 billion, and the government finding another £11.5 billion of savings; effectively to offset lower than expected growth and tax-take while attempting to stick to deficit reduction targets.

Other striking moves in the spending review include a cap on welfare spending, excluding state pensions, a temperature control on the winter fuel allowance, and a number of road building programmes.