Rabbi Julia Neuberger, chief executive of the King's Fund, said the money should be poured into areas like mental health and elderly care where it could make the most difference.

"Sustainable sources of new funding are excellent news for the NHS, but it should not be frittered away on waiting lists," she said. "The new money should be focused on areas of greatest need and services which can make the greatest difference such as mental health and older people's services."

Prime Minister Tony Blair told the NHS Confederation's 50th anniversary meeting on Thursday that some of the extra NHS funds - expected to be announced in two weeks as part of the government's comprehensive spending review - would go into new technology and innovative projects.

But he signalled that waiting lists were an important priority. The government has promised to reduce the lists it inherited last May by 100,000 by the end of this Parliament.

Mr Blair said: "People are fed up with waiting. They wait to get an appointment with their GP, they wait for a hospital appointment, they even wait to be discharged from hospital."

Public debate

Rabbi Neuberger believes that new priorities could be set if there was a wide public debate on the future of the NHS. "We need a new vision with strong ideals and an ethical framework based on the sense of obligation to one's fellow citizens that lies at the heart of public service," she said.

The public should be involved in the debate on the NHS' future

The King's Fund is working on ways to include the public more in health decisions, such as citizens' juries. These have already been tried out in some health authorities, such as Barnet in north London, where it was used to decide the future of a local hospital.

Rabbi Neuberger said the public had to be involved in an honest debate about what was possible for the NHS, given that cash problems were likely to continue.

"Rationing will not disappear, however well the NHS is run," she said. "Conflicts cannot be resolved by changing structures - we actually have to think and have honest debate about the future."

The NHS Confederation conference heard warnings about the implications of Britain's ageing population on healthcare into the millennium. Howard Davies, chairman of the President's Committee of the Millennium Debate, said a nationwide project called the 'Debate of the Age' showed that the next 50 years would be much more difficult for the NHS than its first half century.

Clear limits

Stephen Thornton, chief executive of the NHS Confederation, told the conference that clear limits had to be placed on NHS care and treatment. He added that the public had to be told that the NHS could not afford every new treatment.

"Overall confidence in the NHS and its management will only improve if we tell people the truth, even when it is unpalatable to do so and when we are explicit about the choices we have to make," he said.

Calling this "demand management", he said it was not the same as rationing. It could include self care, better support for GPs so they explain clearly to patients the risks of undertaking any treatment, health promotion and the introduction of an additional stage in the drug licensing process.