The NHS budget has increased by over 7 per cent a year since 2002, but that stops in 2008 and is likely to drop to under 3.5 per cent.
The report recommends that the DoH concentrate on variations in hospital performance, productivity, and winning the support of health staff.
It argues that the slow-down in funding should not damage patient care and delivery of better services.
King’s Fund chief executive Niall Dickson said: ‘Everyone knows the days of massive growth in health spending will come to an end from 2008. It should not be a cause for despair.’